He hates them. And they fight him.
The relationship between Elon Musk and the traders who sell Tesla stock short is one of the dramas on Wall Street.
Short-selling is a bet that a stock's price will drop. And last year Tesla was the most profitable company for short-sellers, according to a study by Ortex.
In the month of December alone, anti-Tesla investors saw their bets bring in $5.44 billion, according to the study by the New York analytics provider.
Short-sellers have made some $15.75 billion in mark-to-market profits, according to Ortex. Tesla’s stock declined 65% in 2022.
This represents a return of 80.4% on the $19.6 billion invested in short positions on Tesla in 2022.
TSLA Operating vs. TSLAQ Hope of Short-Sellers
For the two years leading up to 2022 short-sellers had burned their fingers on Tesla stock.
In 2021, they collectively lost $10.3 billion because the Model Y maker's stock gained 50%. The losses for short-sellers also were enormous in 2020: That year they collectively lost nearly $41 billion as Tesla’s stock surged.
Traders betting against Tesla believe that the group now faces strong competition from legacy carmakers, Chinese automakers and startups. They doubt Tesla's ambitions to dominate the sector.
On social networks, the hashtag #TSLAQ is a way to identify the most extreme critics of Musk and Tesla. They are convinced that the manufacturer of electric vehicles will go bankrupt. Until 2016, the letter Q was placed at the end of a Nasdaq stock symbol to indicate that the company had filed for bankruptcy.
Musk viscerally hates those who bet against Tesla.
Last May, the techno king, as he’s known at Tesla, attacked Bill Gates because the Microsoft (MSFT) co-founder had a short position of $500 million against Tesla.
"Sorry, but I cannot take your philanthropy on climate change seriously when you have a massive short position against Tesla the company doing the most to solve climate change," Musk had written to Gates. It was at the end of a discussion that the two billionaires were having about working together for common causes.
The mogul later accompanied his criticism with a cruel tweet aimed at Gates.
'We'll Also Go After the Wall St Short-Sellers': Musk
'In 2018, Musk also did not hesitate to express dislike for the financier David Einhorn, founder of hedge fund Greenlight, who shorted Tesla. Musk literally had a box of shorts delivered to Einhorn's home.
"I want to thank @elonmusk for the shorts," Einhorn posted on Twitter on August 2018 with a photo of the shorts. "He is a man of his word! They did come with some manufacturing defects. #tesla."
"Put them on & post a selfie," Musk commented.
Musk has just stepped up his efforts to take on the short-sellers. Tesla is building a team of in-house lawyers, the company's general counsel said on April 4. The goal is clear: to counter the short sellers.
"Tesla Legal is building something unique: a full-scale internal litigation and trial team that can handle all aspects of litigation and trial work, including briefings, hearings, discovery, depositions and trials, completely in-house,” Brandon Ehrhart, Tesla’s general counsel and corporate secretary, wrote on LinkedIn.
He encouraged candidates who “enjoy handling sophisticated litigation and trials but are frustrated by internal issues like conflicts and passing on work for clients you love” to apply.
Musk explained the logic behind putting together this team of seasoned lawyers.
"Tesla will continue to use outside litigators, but it’s important to build a powerful litigation team internally, so that we’re not always on the defensive,” the billionaire said.
He added: "We’ll also go after the Wall St short-sellers, certain law firms & (sometimes) corrupt regulators who are the true evil.”
Besides the short sellers, Musk and Tesla have strained relations with the U.S. Securities and Exchange Commission, tied mainly to the billionaire's tweets.
In 2018, the SEC fined Musk and Tesla $20 million each for tweets Musk sent that he was going to take Tesla private and had secured funding for such a deal. Musk also lost his chairman title and the board was required to monitor his tweets regarding Tesla.
Last year, Musk unsuccessfully sought to have a judge overturn the SEC ruling on the grounds that his right to free speech had been violated.
In addition, the SEC is currently investigating tweets Musk posted in 2021, in which he consulted Twitter users, asking them to vote on whether he should sell Tesla stock.
