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What happened
Actions of You’re here (NASDAQ: TSLA) were struck early Wednesday morning. The stock fell 7.4% at the start. At 11:45 a.m. EST, however, it was only down 3.1%.
The stock’s big success this morning was probably due to a tweet last night from famous investor Michael Burry. The former hedge fund manager, who is well known for predicting and profiting from the subprime mortgage crisis, said he is currently selling Tesla shares.
Model 3. Image source: Tesla.
So what
“Therefore, [Elon Musk], yeah, I’m running out of TSLA $, but some free advice for a good guy… Seriously, issue 25-50% of your stock at the current ridiculous price, ”Burry tweeted. It is not a dilution. You would cement permanence and an incalculable faculty. “
By shorting a stock, investors can make money when a stock goes down. Of course, the reverse is also true: the investor can lose money in their short position when a stock goes up.
Following an almost 800% rise in Tesla’s share price over the past 12 months, the valuation of growth stock becomes difficult to justify.
Now what
Tesla will need to execute with near flawless precision going forward to justify its valuation. Specifically, the electric car maker will likely have to continue growing vehicle sales at rates of 30-50% per year, demonstrate even faster growth in its nascent green power business, and make substantial progress towards driving. autonomous.
Despite the costly valuation of Tesla stock, investors may want to refrain from shorting the stock. Given the company’s stellar performance recently, betting against the automaker seems like a risky bet. After all, investors could easily avoid the stock altogether if they are uncomfortable with the valuation of the stock. Additionally, short selling is generally considered to be very risky and investors should make sure that they understand the risks of short selling before doing so.
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