Elon Musk Is Increasing His Stake In Tesla. What Could Go Wrong?
Elon Musk made another large investment into Tesla Monday, buying up $9.85 million worth of company shares and increasing his holding to nearly 20 percent, MarketWatch reports.
Musk, the CEO of the electric car company, made the his largest purchase of Tesla stock since March 2017 after news broke that Tesla had reassumed the spot of the most shorted company on the market. Short selling involves a highly speculative bet that a company’s stock price will decline in the future.
“Tesla, which was overtaken by Apple as the largest U.S. equity short recently, is back on top of the league tables, a position it has held since March 2016,” S3 Partners Head of Research Ihor Dusaniwsky wrote in an April 11 report on market data showing Tesla as the largest short, according to CNBC. “Tesla short sellers, after reducing their short exposure for the first two months of 2018, have reversed course and shorted Tesla stock heavily over the last five weeks.”
Tesla stock has been on a steady decline for the past year, despite gaining 3 percent on Monday. The stock price remains down 2.8 percent in 2018 and down 5.7 percent from 12 months ago, according to MarketWatch.
Because short sellers are betting against the future value of Tesla’s stock, if the stock price outperforms the analysts’ predictions and increases in the future, the short sellers’ losses are “theoretically infinite,” according to Investopedia.
Musk played into that reality, taunting short sellers on Twitter.
Looks like sooner than expected. The sheer magnitude of short carnage will be unreal. If you’re short, I suggest tiptoeing quietly to the exit … https://t.co/A0Q90pSLKA
— Elon Musk (@elonmusk) May 5, 2018