As Tesla Surges 44% In 10 Sessions, Bearish Analyst Smells Stock Manipulation: 'They Keep Buying Puts To Cause Inorganic Buying'

A Tesla, Inc. TSLA bear weighed in on the recent stock price surge and the strength of the rally, while a bull made the case for the company considering a stock buyback.

Gamma Squeeze? Tesla bear Gordon Johnson flagged an unusual pattern in the options market, which may have to do with the recent upside. Around the time the Elon Musk-led company reported second-quarter deliveries, the ratio of the put vs. call options purchased increasingly materially, he noted.

For much of the options chain with the largest total amount outstanding, the put/call ratio is close to 1.0, and in some cases over 1.0, which is unusual for a stock going upward, the GLJ Research analyst said. There were so many puts purchased that will clearly expire out of the money, he said, adding that someone is wasting $5 million to $10 million to buy puts that will expire worthless.

Those who were pushing the put/call ratio higher know that brokers on the other side will have to hedge the risk of selling these puts by buying Tesla stock, causing a gamma squeeze, the analyst said. “Thus, they keep buying puts to cause inorganic buying, thus squeezing…,” he added.

Tesla did not immediately respond to Benzinga's request for comment.

The view that Tesla was moving up for fundamental reasons couldn’t be any further from the truth, given the second straight quarter of year-over-year deliveries decline and the likely negative impact cheap financing options can have on second-quarter revenue, Johnson said.

“TSLA’s stock is, once again, being manipulated via, SOMEONE, willing to lose $5-$10mn/day by buying put options they know will likely expire worthless, but, at the same time, force brokers to BUY $TSLA’s stock as a hedge against selling those options,” he added.

See Also: How To Buy Tesla Stock

Bull Calls For Buyback: Amid the stock rally, Future Fund Managing Partner Gary Black said portfolio managers holding Tesla would prefer the company to buy back $20 billion in stock rather than raising $20 billion of new equity.

“Anyone who has built a TSLA forward looking cash flow model can see that TSLA is likely to generate $100 BILLION in free cash flow between 2024-2030 that they can't possibly spend on plant expansion, AI, and robotaxis,” he said.

The fund manager said his 2024-2030 free cash flow included capital spending of $113 billion for the same period. Tesla was already letting excess cash build up at a return of investment far less than its cost of capital, he said, adding that this will ultimately result in the company’s Price/Earnings ratio degrading.

While conceding that Tesla may not announce a $20 billion buyback program next quarter, given the economic slowdown, Black said an equity raise by the company can ward off many institutional investors.

Black has previously voiced his support for stock buybacks as a means of arresting the slide in Tesla shares since late 2021.

In premarket trading on Wednesday, Tesla shares rose 0.47% to $263.55, according to Benzinga Pro data. Tesla has added 43.7% since June 25 and has been on a 10-session winning streak.

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