The Market Is Betting Against Elon Musk and Tesla

Elon Musk, Tesla
Jerry Lampen/AFP/Getty Images

As Tesla faces major delays in shipping its Model 3 design, share values have plummeted into “bear market” territory — and investors are putting money on it.

At more than 20 percent below their record high in September 2017, Tesla is struggling to find investor confidence. Or, at least, confidence in their success. As it stands, the money being on the table points to an assurance that the high-tech car company will fail.

IHS Markit Securities Finance Director Sam Pierson observed that “while equity short sellers continue to hang around, shorts in the most liquid TSLA bond have made a tidy profit so far in 2018.” However, “They have not covered to lock in the profit, suggesting that they think the credit will continue to deteriorate.”

Bets against the company have soared beyond a quarter-billion dollars, representing most of the claimed 99% of the lending supply available for shorting the company. In short — no pun intended — traders are borrowing stocks they are reasonably certain they can purchase later for a pittance, making their profit if the price of the stock tanks.

Things are not looking good for the latest line of electric roadsters. Reported problems at the “gigafactory” are responsible for more recent delays, and employees expect there will be more to come. And with each slipping date, the excitement for the next generation of Muskmobile plummets.

“Tesla shares may be nearing a cross-road,” Pierson said. “With the short demand for Tesla increasing through the recent sell-off — and the short demand for bonds fully utilizing the available supply — it appears short sellers are looking for more downside before they begin to cover.” Waiting, in other words, for Tesla to run out of battery power in the middle of a financial superhighway.