The trading week of May 20–24 was not kind to Tesla. The stock dropped more than 20 points, which translates into a loss of some $3.5 billion in market capitalization. The primary reason for the plunge was investor reactions to a full-court press of negative comments from analysts and the media.
For years now, Tesla has enjoyed a market capitalization sufficient to distinguish it as one of America’s 500 most important publicly traded companies. The missing ingredient for Tesla’s inclusion in the granddaddy of all indexes, the Standard and Poor’s 500, has been consistent profitability. Now that Tesla has shown a profit of more than $300 million in Q3 of 2018 and its CEO Elon Musk predicts continued profitability ahead, inclusion in the S&P 500 index is extremely likely in the not-so-distant future. Let’s look at this event’s implications for Tesla and its stock price, plus consider the likely timing of such a move.
A great deal of attention has been recently placed on the conflict between Elon Musk and the Securities and Exchange Commission (SEC) regarding certain tweets by the CEO of Tesla. What is not clear to many, however, is the extraordinary number of potential securities violations that are happening regularly with regards to Tesla’s stock (NASDAQ: TSLA) that are the work of individuals opposing Tesla’s success. It’s fair to say that a war is presently underway between Tesla and its enemies.
The New York Times interview of Elon Musk released late in the night of August 16, 2018, clobbered Tesla’s stock price the next day, resulting in a fall of more than $30 a share by the end of Friday’s after-market trading and a single-day transfer of wealth of over a billion dollars from Tesla’s investors to the stock’s short sellers.
The official numbers are now in and more than 38 million shares of Tesla (Nasdaq: TSLA) were in the hands of short sellers as of April 13, 2018. That’s a whopping 10 million shares picked up by shorts in just one month’s time and a strong indication that TSLA short interest topped 40 million shares later in the month. To put the numbers in perspective, TSLA shares held by shorts during the past 12 months have previously ranged from 27 million shares to a bit over 31 million. Even with those lower numbers, TSLA managed to sometimes hold the title of the most shorted stock in the USA! Above 38 million shares, though, that means that more than 30% of Tesla’s tradable shares are in the hands of entities that are betting the stock will lose value. The track record of those who bet against Elon Musk is not good, particularly when the number of shares sold short reaches such epic heights.
