The shorts got their man. Literally.
When I read the complaint about what Elon Musk allegedly did -- basically dream up something that could hurt the shorts more than anything else, something that would remove the stock from trading -- I say to myself that he has to be the first CEO who let the shorts destroy his reputation.
Some may think that "destroy" is too strong a word but the SEC complaint traces out a totally chimerical $420 offer that seems to have been done in order to make it so shorts would have to cover or be busted.
Here are the issues that I see in play for the stock. One, would you own the Tesla (TSLA) stock if Musk is not in charge? I think that if Musk isn't running the place a sizable number of people will start viewing it as a money-losing car company and that's not desirable so the stock goes down.
Two, given the incredibly brazen, totally made-up, story about a $420 bid, alleged by the complaint, is there any chance now that this man, who spurned a "no-admission no-deny" offer from the SEC, will NOT be charged by Justice with fraud? When you read the brief by the government it literally does everything but say manipulated the stock for his own benefit. How that can that NOT be fraud? How could he be so reckless as to fight the SEC when they have him dead to rights? I think while we wait to see if Justice does go against him because he insists on innocence, you can't own the stock because it will be difficult to refinance, something that Musk needs to do fairly soon.
Three, bankers will pretty much raise money for anybody who is not going to jail but if Justice is pursuing Musk even right now in a parallel path, even the most gullible, desperate bankers may say no. It is highly unlikely that a risk factor like "the CEO might end up in jail" will be something that any banker wants to add to the prospectus.
Look, if the company weren't pretty much in constant need of money because it loses so much money per car, this might just be some theoretical discussion about a creator stepping aside from the CEO job and a new person comes in, a John Scully so to speak. But there is nothing theoretical about a company with a balance sheet from hell trying to raise money without a CEO, potentially, or with a CEO who could, one could argue, be charged any minute with fraud.
So why isn't the stock down much more? I believe a game has been played for a long time between the shorts and the longs. The shorts think it should be at zero. The longs think it should be at $1,000 - minimum -- and were upset that the game might be stopped at $420.
The longs will wait and if nothing happens presume all is well. Why not? They believe nothing will change. It's all good.
The shorts will be more emboldened but will press their bets and not be able to find stock to do so.
The bottom line? I think it can go down, maybe a lot, but nowhere near the fair value of a real car company simply because the longs will craft -- in their minds -- a way that Musk stays on and will even be better than before.
That's how thick they believe. Until this man is removed from the premises they will love the stock. If he isn't, give them some time: they will be back as buyers.