Why Tesla Shorts Can't Stop, Won't Stop

Tesla Inc TSLA shares were in the red Friday after the electric vehicle manufacturer unveiled its highly anticipated Cybertruck the prior evening.

While investors should be discussing pricing, margins and demand, social media is instead buzzing about a questionable demonstration that didn’t quite go as planned.

After CEO Elon Musk said the windows on the new Cybertruck were “unbreakable,” Tesla’s design chief threw two metal balls at two windows of the truck, smashing the glass both times.

The demonstration was completely unnecessary and apparently not rehearsed beforehand. But it’s far from the first time Musk has made questionable decisions that have served as a distraction from Tesla’s business and provided fuel for Tesla short sellers.

Elon Being Elon

Earlier this week, a judge ruled that Musk must face trial in a defamation case after he called British rescue diver Vernon Unsworth a “pedo guy” and “child rapist” in 2018. Incredibly, Musk’s lawyers argued in court that reasonable people wouldn’t take Musk’s Twitter feed seriously given all the frivolous topics he discusses. They argued that assuming Musk uses Twitter “to disseminate facts is highly misleading.”

Musk agreed to a fraud settlement with the SEC last year due to another Twitter misstep in which he tweeted he had “funding secured” for a Tesla buyout at $420 per share. But at least that tweet had to do with Tesla directly. 

Many of Musk’s other questionable decisions have had nothing to do with Tesla’s business, yet they embolden short sellers who doubt his fitness to lead the company. Musk smoked marijuana with Joe Rogan on a podcast last year and said humans are “most likely [living] in a simulation.”

Musk often lashes out publicly against the media, Tesla short sellers and other critics. Rapper Azealia Banks claimed Musk was tweeting on acid when she was at his house. Musk said he was sleep-deprived and a frequent user of Ambien in a tearful interview with the New York Times last year.

These are some of the reasons why Tesla remains one of the most heavily shorted stocks on Wall Street. Tesla hasd $8.31 billion in short interest as of the end of October, making it the second most-shorted U.S. stock, according to S3 Partners.

Tesla shares were down 6.25% at $332.64 at the time of publication Friday.

Benzinga’s Take

For Tesla bulls, Musk’s extracurricular behavior is part of the package that includes his vision, creativity and leadership. For short sellers, it is a sign of poor decision-making and lack of focus and discipline that will eventually catch up to Tesla’s business.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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Photo courtesy of Tesla.