Tesla Motors Inc (NASDAQ:TSLA) has pretty high short interest, and it’s been rising for several days as the company’s stock price looks increasingly shaky. About 17.7% of the company’s shares were held short at the end of August according to Nasdaq. Yesterday Elon Musk said he doesn’t think shorting the company is a good idea. Investors clearly aren’t listening. Is right now a bad time to short Tesla Motors Inc (NASDAQ:TSLA)?
On today’s market shares in the electric car maker slid by more than 1% in the morning. Shares have lost just over 2% of their value in the last two days trading, and some of those shorting the company are licking their lips at the prospect of actually making money on the Tesla short.
Elon Musk isn’t short Tesla
Elon Musk is the CEO of Tesla Motors Inc (NASDAQ:TSLA). Of course he’s going to say it’s not a good idea to short the company. Elon Musk has definitely moved away from actively promoting the company’s stock because its value has gotten so high, but he’s not going to say it’s a good idea to drive the price down.
If he did, he stands to lose billions, and the company could be irreparably harmed by the vagaries of the stock market. Musk is not the kind of person you should listen to if you want to figure out the real value of Tesla Motors Inc (NASDAQ:TSLA). The stock has become disconnected from its fundamentals, and that’s dangerous.
Market irrationality
Tesla Motors Inc (NASDAQ:TSLA) is valued at an incredible level that prices in an amazing amount of growth for several years into the future. The stock is priced purely on that growth, and that means if the price turns it could lose value very quickly. Shorting the company might seem like a good idea given the pricing of shares, but there are no guarantees.
Tesla is a revolutionary company—it’s well run and managed to create an entirely new market. This isn’t about the company Tesla Motors Inc (NASDAQ:TSLA), however, this is about the stock. The two have become almost entirely disconnected in 2013.
Shorting Tesla Motors Inc (NASDAQ:TSLA) is probably not a good idea because of the risks involved. Shorting a company is expensive, and it’s not something to be rushed into lightly. For value investors the best idea is to stay away from Tesla altogether, until the market finds a better way to value the company.
