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Comment by tw1010 | Hacker News Reader

TLDR?

The argument goes that bad actors are trying to tank TSLA by using massive short sales as a signal to the rest of the market that Tesla is a bad investment. That's not entirely a surprise. The surprise is that there's a historical precedence for it, from the very same bad actor investors. This pattern has played out with a company in the early 2000's called Fairfax, and then with SolarCity a decade later. The same thing is happening to Tesla - the graphs are striking. Tesla's response is to cut costs and become self-sustaining, wean itself from dependency on investors, and break the short-sellers' strategy.

Why are they trying to tank it? Short term profit or some conspiracy theory?

Because short sellers profit when the stock price goes down.

And they stand to lose money if the prices go up.

Largely, afiact, they're trapped between their shorts and a hard place. They can't buy shares back at or below what they sold the shorts for, so unless they can manipulate the media, they will surely go bankrupt.

For a (quite plausible IMHO) "conspiracy theory", look upthread:

https://news.ycombinator.com/item?id=17522791

and downthread:

https://news.ycombinator.com/item?id=17522820

>then with SolarCity a decade later.

SolarCity failed because it was a bad business. Shorts believe the same about Tesla, which may or may not be true. Do you think short-sellers randomly choose companies to sell, or do they look at fundamentals and decide the company isn't viable?

This idea that you can simply short a company until goes out of business is asinine. It's far riskier. The downside of shorting is unlimited. Fairfax still exists.

People like to bring up Chanos and Farifax when talking about Tesla, but they rarely mention he was also early on Enron.

Did you read the post? He mentions Chanos was early on Enron right away, as part of his bio, and goes into SolarCity in some depth. I didn't invest in SolarCity, and don't know the specifics of what made it a bad company. Most of the news I read a few years ago was about how solar itself as well as their model specifically was failing, and that clearly hasn't happened.

Is there another reason? Could you enlighten me?

>I didn't invest in SolarCity, and don't know the specifics of what made it a bad company.

My evidence is that it had to be bailed out by Tesla, then wound down. They spent vast amounts of money to grow; you know the old selling a dollar for $0.80. Borrowing short, lending long. Most of the time, that doesn't work. Solar power is a commodity, and prices are rapidly falling. I think the onus is on others to prove that it was a good business that couldn't handle short-sellers.

Again, if it was so simple to destroy a company through shorting, why isn't it happening everywhere, all the time?

Furthermore, who is "they"?:

>They are not shorting because they think Tesla will go bankrupt. They are shorting during specific periods when Tesla is most vulnerable, and covering when they fail to achieve their targeted goal. They are shorting to bankrupt Tesla.

I've been short TSLA twice (but net long through ETFs). The first time was early, and I lost money. The second time was in the recent run up after the 5k/week news, when I made a few bucks.

Was I trying to bankrupt Tesla?

>Again, if it was so simple to destroy a company through shorting, why isn't it happening everywhere, all the time?

I don't think it's simple - on the contrary if the writer is correct, it seems to require a great degree of organized and concerted effort. It's probably not something that would normally be worth it, but it used to happen in the Chicago futures markets and early NYSE all the time. It's pretty well known now that the rating agencies are not disinterested third parties, and none of this is all that outlandish, really.

>Furthermore, who is "they"?:

the author alleges a group of hedge fund managers led by Jim Chanos, presumably including Stamford Capital's Steve Cohen.

Continuing the hypothetical short conspiracy idea, would Big Carbon interest also be involved? How would they relate to the shorting activities?

The article draws a parallel between what Chanos (or the guy who worked for Chanos) did to Fairfax and what Chanos is doing now i.e. trying to tank the stock with unethically:

”Incredibly, over the next three years was stories of harassment of Fairfax workers, the CEO Prem Watsa, his wife, even his pastor. While this was happening Fairfax was besieged by accusations of fraud sent to rating agencies, regulators, even Fairfax's own business partners. Nearly all of these troubles could be traced back to Spyro Contogouris, a man hired by Chanos, Loeb, and Sender to "bring down Fairfax". Contogouris’s strategy would be to sink Fairfax by “closing access to the capital markets”—cutting off its access to funding by undermining its reputation. This was old-school Sun Tzu stuff, isolate-and-destroy tactics, “attacking by stratagem”: General Contogouris would cut off his enemy’s supply lines by, among other things, sullying the firm’s standing with ratings agencies and shareholders and others in a group he termed “FoF,” for “Friends of Fairfax.” He wanted to “get them where they eat,” cutting off their credit lines, particularly going after their ratings by agencies like A. M. Best. All this Contogouris promised to Chanos, Loeb, Sender, and others from the start. He pledged to “get the message of what I think is a massive fraud to these long term value holders” by creating a “crisis of confidence” that would frighten investors and “shake them out of the stock.”

It's a good read.

It argues that short sellers want to kill Tesla and they have a chance because Tesla somewhat resembles a financial company.

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