Hacker News Reader

Comment by romed | Hacker News Reader

As I said nine days ago in this box and was roundly downvoted therefor: "Good chance that Musk will get placed on the bad actors list and will be unable to serve as an officer or executive of Telsa." What I don't understand is how this took 10% of the price of Tesla shares. How is it possible that this event, which was a 100% certainty, was not already baked into the price?

View on HN

I think most people thought Musk would get off with a fine. For a company partially driven by a cult of personality (at the very least given a significant benefit of the doubt). That hope was diminished and without Musk the entire company will be perceived differently.

The outcome wasn't 100% certain? There was supposed to be a settlement, presumably milder in sanctions, but then Musk said no thanks. The share price reflected the possibility that Musk might play nice. Now he won't; now it doesn't.

> How is it possible that this event, which was a 100% certainty, was not already baked into the price?

Nothing is ever 100% certainty. And this isn't the outcome, just the lawsuit. There is plenty still left to chance.

But I've just ordered a 5-ton bucket of popcorn!

My guess would be, a good number of TSLA investors--probably more than most publicly traded stocks--are retail investors.

Almost everyone except you has been surprised so that should give you a clue. The Bayesian probabilities are all relative :). If you did believed 100% then you should have shorted the hell out of that stock. But you didn't so my guess is that even for you it was more like 90%.

...and your flaw was in believing the market is efficient.

Reply on news.ycombinator.com