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Tesla Stock Tumbles By $270 Billion, A New Huge Short Position Might Be Behind The Slide

Tesla's market cap has gone down by more than $270 billion in just the last month. There are several possible reasons for the slide including short sellers and many more.
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In what has been a perplexing month for Tesla stock, the value of the EV maker has gone down by a staggering 250 billion dollars. This amounts to a 30% loss in the value of the company. Tesla’s stock is no stranger to volatility however, the current dip seems as though it came out of thin air.

Usually, when Tesla stock makes big moves it’s tied to few fairly predictable variables. There is new product announcement, vehicle deliveries, quarterly earnings, production capacity, investor presentations, and the biggest one - Elon Musk’s statements in the media or on Twitter.

Recently, there hasn’t been any new information that has come out regarding any of the above metrics. And Elon Musk has also been in his “good behavior”. Either the Tesla CEO has been staying away from controversies or people have come so used to his quirks they no longer make the headlines. Either way, Elon Musk is not to blame for the decrease in Tesla’s stock price.

Tesla Cybertruck

Related news: Elon Musk Maybe Right, Bill Gates Obfuscates When Asked If He Shorted Tesla Stock On CNBC

Tesla stock, especially when it goes down sharply, is usually in response to Musk doing unorthodox things such as smoking weed on the Joe Rogan podcast and the infamous “$420 funding secured” tweet. So if not Elon Musk and none of the classic metrics so what then?

One possibility is the shorts. After a painful 20X increase in Tesla’s valuation in less than two years, they might have finally decided it is time to start shorting Tesla stock once again. However, the Tesla of now is a much different animal than the Tesla of mid-2019.

Tesla is now the fifth-largest US company by market cap and taking a short position large enough to move the market price is now much more difficult. At its peak, on January 26, Tesla had a valuation of over 950 billion dollars. So to push down the stock price of such a big company it’s going to take equally big players.

In addition, Tesla was added to the S&P 500 recently. As a result, the stock has been purchased by a number of index funds that track the S&P500. What this means is a chunk of the stock available has now been locked up with these funds basically in perpetuity.

Related news: Musk Defends Bitcoin Buy by Inability to Receive Return on Tesla's Cash

So given the above facts who has enough money to take a big enough short position to make Tesla’s stock tumble? One possible option is Bill Gates. Elon Musk, in his recent Joe Rogan appearance, accused Gates of holding a large short position on Tesla. Musk claimed he has it from reliable sources his assertion was true. Following Musk made fun of Gates by saying “if true he lost a lot of money”.

A few days later Bill was given the opportunity to respond to Musk’s allegations on CNBC but chose to answer only with “I don’t talk about my investments”. This doesn’t necessarily prove Gates has been shorting Tesla however, it makes it highly likely.

So is Bill Gates currently behind Tesla’s stock market crash? There is almost no way to say for sure. But with Musk making fun of Gates just last week, the timing does make sense.

Tesla Model 3

Having said that, there are still a multitude of variables that can affect any stock. One equally plausible scenario is given the incredible run-up on Tesla stock price some investors might have just decided to cash out their winnings. Or maybe there was a small pullback on the stock price and that started an avalanche of selling. Or it could be a combination of a thousand other possibilities.

So what do you think? Are short-sellers, possibly including Bill Gates, the reason for Tesla’s stock price decrease? Or do you have a better theory of what might be going on? And are any of you Tesla stockholders? If yes, are you selling the stock currently? Let me know your thoughts down in the comments below.

For more information check out: Toyota and QuantumScape Still Must Overcome Solid-State Battery Hurdles Also, see Elon Musk Makes a "Final" Update on Tesla Cybertruck's Design

Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars to Elon Musk, the energy business, and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.


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Comments

Hi, It is highly likely that Gates has shorted Tesla. There appears a lot of jealousy and mistrust amongst these American oligarchs. Besides he pontificates on things he knows nothing about eg Tesla electric trucks won't work. People tend to act irrationally so some of it will be sorting out the weak who panic and sell when stock prices fall. I do own Tesla stock.
Will you be adding to your TSLA position as the stock goes down. Could be an opportunity to decrease your cost basis.
I would be shocked if the move downward were not a coordinated attack on the Tesla stock via short positions. I will be sitting on my shares and enjoying the roller coaster ride. I would also be shocked if Bill Gates were not part of this activity. He avoided answering if he had been shorting the stock previously and likely is quite angry that Musk mocked him as well as angry about the backlash. Will just have to wait to see how the drama plays out... This is nothing new with Tesla stock, it has been shorted it's entire existence and fighting the old power structure. Hopefully it can continue to fight the good fight and help those invested on the long side.