August 23, 5:00 pm EST It was two weeks ago when Elon Musk sent this tweet about taking Tesla private…
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For a guy that has taken personal offense to the short sellers in the stock, this tweet only emboldened them — and may have been the catalyst that will ultimately prove the shorts right. Why? If you liked shorting a company that’s lost $6 billion over the past five years, while making the CEO/ founder a billionaire more than 18 times over, you’ll love it when you have an absolute ceiling of $420 to sell against. And that’s precisely what the shorts have done. They’ve leaned more heavily against the company, as Musk has created an asymmetric outcome for them. As you can see in the chart, it’s working. |
As I’ve said in the past, Tesla is among the tech giants that benefited from the Obama administration’s distribution of the massive fiscal stimulus package that followed the global financial crisis. Not only did they get regulatory favor from the government, but they received outright funding — a $465 million loan, at a time the company was broke. And in that economic environment, the big pension funds were happy to follow government money in search of relative security (plowing money into government “sponsored” investments). Fast forward 10 years and the company is still bleeding money, but Musk is a billionaire! But sentiment has finally begun turning against the company, which is it’s biggest risk. When the investors stop believing in the hype and start demanding real performance, the air can come out of the balloon very quickly. So, to step out of the scrutiny of public markets, Musk has threatened to take the company private, with the help of Saudi funding. But there’s a new problem. If the Saudis are indeed willing to fund Tesla, Trump may block it. The administration is stepping up protections against allowing U.S. intellectual property to fall into the hands of foreigners. The government may giveth and the government may taketh away, in the case of Tesla. If you haven’t joined the Billionaire’s Portfolio, where you can look over my shoulder and follow my hand selected 20-stock portfolio of the best billionaire owned and influenced stocks, you can join me here. |