Sign up Canada
Proactive Investors - Run By Investors For Investors

Tesla's stock shorts earn $500 million as Elon Musk tweet may endanger deal with SEC, says S3 Partners

Musk and the SEC must justify the deal they reach to settle charges of fraud against the Tesla CEO
Tesla signage
Tesla stock shorts reap millions of dollars off a tweet by Elon Musk attacking the SEC

Short sellers of Tesla Inc (NASDAQ:TSLA) reaped hundreds of millions of dollars when a tweet by company CEO Elon Musk slamming US regulators drove the price of the stock even lower on Friday, a report by S3 Partners said.

Musk dubbed the US Securities and Exchange Commission the "Shortseller Enrichment Commission" in apparent anger at being forced to pay a $20 million fine for his tweet to take Tesla private last month and that funding had been "secured."

Musk and the SEC had reached a settlement on the lawsuit the regulators filed against him for fraud on his now abandoned plan to take the company private. A US district court judge demanded that both Musk and the SEC explain next week why the deal is reasonable and fair.

"His (Musk's) actions could easily put the settlement at risk, depending on the attitude of the federal judge that must approve the deal," Ihor Dusaniwsky, the managing director of Predictive Analytics at S3 Partners, said in a report.

READ: Elon Musk slams SEC as US judge demands explanation for fraud settlement

Punters who are shorting Tesla's stock have had a field day with the stock.

"Since Musk agreed to step down as chairman, Tesla shares have slipped from $310 to $281, netting shorts $941 million, a return of 9.6% in less than a week," Dusaniwsky said.

"Friday’s reaction to the insulting tweet pushed the shares even lower and produced more than half a billion in paper profit for the shorts."

Tesla's stock closed on Friday in New York down 7.05% at $261.95. The stock recovered somewhat in afterhours trade by 0.26% to $262.63.

The shorts have been increasing their positions in the company following strong selling by Tesla longs because Musk has demonstrated a refusal to stay away from controversy.

READ: Greenlight Capital's David Einhorn compares Tesla's difficulties to those faced by Lehman Brothers, says CNBC

"The SEC is in the awkward position of coming up with ways to contain him without permanently damaging the small investors who speculate in the stock," the S3 official added.

The actions by Musk had invited scorn from investors like hedge fund manager David Einhorn, who slammed the Tesla CEO.

Tesla's go-private plan last month unravelled when his claim that funding was secured proved to be not true.

Reporting by Rene Pastor. Contact: [email protected]

View full TSLA profile View Profile

Tesla Inc Timeline

Related Articles

November 19 2017
When finalised, Iplayco will own the IP rights to the Play Mart and Play Planet brands, as well as the Play Planet line of business. .

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You understand that the Company receives either monetary or securities compensation for our services. We stand to benefit from any volume this write-up may generate.

You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Copyright ©, 2018. All Rights Reserved - Proactive Investors North America Inc., Proactive Investors LLC

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use