Technology

Tesla’s Musk squashes the shorts


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Short sellers have thrown in the towel on Tesla, with positions as a percentage of its total tradeable shares falling to 3.3 per cent, from 19.6 per cent at the start of last year.

Short seller Carson Block, founder of Muddy Waters Capital, says he understands the reasons people choose to bet against Tesla, arguing that “in principle, they’re not wrong” about the fundamentals not supporting its trillion-dollar valuation. “But the other side is [Tesla chief executive] Elon Musk, who is better at playing the public company game than anybody I’ve ever seen.”

Even with negative news over the past month — Musk promising
to sell 10 per cent of his stock if his Twitter followers said so, Tesla being sued for $162m by JPMorgan Chase over an alleged missed payment — the shares have still risen about 30 per cent, reports our markets team.

Line chart of $ showing Tesla’s 2021 wild ride

In today’s Big Read, Robin Wigglesworth looks at the wider footprint of what might be called the “Tesla-financial complex”, which far outstrips the company’s market capitalisation. This is because of a vast, tangled web of dependent investment vehicles, corporate emulators and an enormous associated derivatives market of unparalleled breadth, depth and hyperactivity.

Combined, these factors mean that Tesla’s influence over the ebb and flow of the stock market is far greater than even its size would imply. It may even be historically unrivalled in its wider impact, some analysts say.

Powered by ordinary retail investors, the nominal trading value of Tesla options has averaged $241bn a day in recent weeks, according to Goldman Sachs. That compares with $138bn a day for Amazon, the second most active single-stock option market, and $112bn a day for the rest of the S&P 500 index combined. Tesla has helped push US option trading volumes above actual stock trading volumes this year.

Line chart of Short interest as a percentage of Tesla's total share float  showing Tesla bears throw in towel

Meanwhile, hedge funds that have shorted Tesla shares over the past decade are sitting on cumulative losses of more than $60bn, according to S3 Partners, a financial analytics company. Just this year the losses have come to $11bn. 

“Shorting Tesla is just an ego trade at this stage,” says Michael Green, chief strategist at Simplify Asset Management.

The Internet of (Five) Things

1. Crypto controversy over ‘Star Wars’, ‘Lord of the Rings’
Star Wars Stormtrooper helmets by artists including Sir Anish Kapoor and David Bailey have been photographed and turned into non-fungible tokens and marketed for millions of pounds without their consent, reports Cristina Criddle. Meanwhile, the estate of JRR Tolkien, author of The Lord of the Rings, has successfully vanquished the JRR Token cryptocurrency that styled itself as “The One Token That Rules Them All”. In other crypto news, Binance’s chief executive tells us that it is in talks with sovereign wealth funds about them taking a stake in the world’s largest cryptocurrency exchange. And Fidelity, UBS and State Street Global Advisors have confirmed that they are looking into launching products that offer exposure to cryptocurrencies.

2. China intensifies celebs crackdown 
The Cyberspace Administration of China released a new set of rules to regulate celebrities, their advertising and fan groups, as part of President Xi Jinping’s drive to reform social values in the country. Madhumita Murgia looks at methods of slowing social-media content and misinformation transmission, with design tweaks such as limiting the size of groups or requiring users to copy and paste links, rather than clicking on ‘share’.

3. EU to push for transparency on social-media ads
The EU will unveil draft legislation aimed at curtailing the use of social-media practices such as microtargeting and user profiling by forcing tech groups to share information on how they disseminate ads and target citizens online. Companies that break the rules would face a fine of up to 5 per cent of turnover. Meanwhile, Italy’s antitrust authority has fined Amazon and Apple $225m for alleged anti-competitive co-operation in the sale of Apple and Beats products.

4. Elizabeth Holmes describes Theranos mission to jurors 
The blood-analysis start-up founder accused by US prosecutors of defrauding hundreds of millions of dollars from investors, took the stand in her own criminal trial, telling jurors: “We thought this was a really big idea.”

5. Getir buys Weezy, greener ‘dark kitchens’
Turkish rapid grocery delivery app Getir has acquired its UK-based rival Weezy, as rival company launches and heightened competition forces consolidation in the market. Meanwhile, a boom in Europe’s “dark kitchens”, where takeaway meals are prepared solely for sale on delivery apps, could make the industry greener.

Tech tools — Fairphone 2 gets longer life

We like to highlight the newest gadgets in Tech Tools, but hat’s off to Fairphone, the modular handset company, for breathing new life into the Fairphone 2, introduced in 2015 with Android 5. As part of its mission to build ethical long-lasting smartphones, it has announced that an upgrade to Android 10 will be available in the new year, giving “an unprecedented seven years of support” to the phone. Apple has yet to enable hardware upgrades to its iPhones, but the FT editorial board welcomes it making them easier to repair.

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