Tesla owner Elon Musk and several of the major stock short-sellers have been debating the value of Tesla and his management practices on one hand and the propriety and value of short-selling on the other. I think a terrific debate could be produced around that topic. Musk isn't an economist or Wall St. guy, so he would probably need help from someone else to understand and properly debate the issue.
This article about David Einhorn (of Greenlight Capital) provides a nice introduction to their running argument. The recent SEC settlement made with Musk which stripped him of his company's Board of Directors chairmanship and $41 million dollars is also on the line. If Musk is correct, then the SEC was just punishing him for talking -- the same thing Einhorn and other short-sellers are doing.
In the article Einhorn said, "Greenlight’s efforts helped move Apple to aggressively repurchase stock, driving up earnings-per-share." One has to wonder what Greenlight's "efforts" were and whether it's better for Apple (or any important corporation) to do stock buybacks rather than reinvesting in the company and its employees. Does he see "talking up a stock" as helping or manipulating the market. I suppose it depends on whether he gain or loses. Is he "helping" someone by talking down Tesla? Isn't influencing the market by talking too much considered to be manipulation and improper?
That's the way Wall St. players win. It isn't about the success of the company, it's about knowing the direction a company is likely to go or talking loudly to convince everyone else in the market that the company is going up or down, then making their profits. Talk talk talk. It used to be called "pump & dump" to push up a stock's price. In the world of short-selling it's about convincing stockholders the company is about to fail, so they will sell it, thereby allowing the short-seller to buy those same shares at a much lower price.
This debate has been had before, but now, after the recession of 2007-10, it has more resonance for me. In the period before 2007 the banks were holding mortgages which were valued highly, but which eventually were recognized as nearly worthless. Had there been short-sellers who could recognize their true value and convince the market to re-evaluate them, it might have headed off a major recession. But, people who are invested heavily in something like billions of dollars in mortgages aren't so interested in reevaluating it.
It's easier for Wall St. firms to assault one company, such as Tesla, which is still growing and perfecting its business. They don't have so many supporters as the mortgage industry had.
It's a worthy debate!
That's the way Wall St. players win. It isn't about the success of the company, it's about knowing the direction a company is likely to go or talking loudly to convince everyone else in the market that the company is going up or down, then making their profits. Talk talk talk. It used to be called "pump & dump" to push up a stock's price. In the world of short-selling it's about convincing stockholders the company is about to fail, so they will sell it, thereby allowing the short-seller to buy those same shares at a much lower price.
This debate has been had before, but now, after the recession of 2007-10, it has more resonance for me. In the period before 2007 the banks were holding mortgages which were valued highly, but which eventually were recognized as nearly worthless. Had there been short-sellers who could recognize their true value and convince the market to re-evaluate them, it might have headed off a major recession. But, people who are invested heavily in something like billions of dollars in mortgages aren't so interested in reevaluating it.
It's easier for Wall St. firms to assault one company, such as Tesla, which is still growing and perfecting its business. They don't have so many supporters as the mortgage industry had.
It's a worthy debate!
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