Tesla has become the world’s most valuable automaker — surpassing Toyota — as its stock pushes to a new high at $1,000 a share. Slashdot reader 140Mandak262Jamuna writes: Tesla is in a tear lately, after better than expected sales report from China. Elon Musk himself tweeted, during the trading session too, that it was overvalued at $760. The speculation seems to be centered on the idea that Tesla is going to join S&P500 by eking out a token profit this quarter.
Most people think it is due to some sort of short squeeze or something. But Tesla has sold convertible bonds maturing in 2021, 2022 and 2025 at an average price of $330. 15 million shares. Experienced folks like Ihor of S3 partners or Reflex Research estimate about 12 million of these shares have been shorted to “book profits.” The idea is to borrow shares and sell them at $800 or $900 now, and keep paying the borrow fee for a couple of years. When the bond matures, you get the shares for $330, or cash for the difference between market price at that time and $330. At that point the short can cover the position with cash or stock. If the stock is below $330 at that time, they are guaranteed to get $330! So it is a no-loss strategy, this accounts for 12 million shares most likely. Total short position in Tesla is just 16 million, just 4 million shares, or 4 billion by today’s prices. It is big, but not big enough to squeeze, and there is plenty of shares available to borrow. So it is not short squeeze causing this.
Many engineers and teardown experts are saying Tesla has a phenomenal lead in battery technology and design. Seems to be falling short on manufacturing, paint, and assembly. But overall product is so superior it is overcoming the short falls in these areas. Traditional auto makers saw battery as the fuel tank. Nothing much can be done to improve the fuel tank, so nothing much can be done to improve the battery they seem to have thought. But assembling 8,000 cells and maintaining charge balance and voltages and currents on them is a very tricky thing and people who outsourced this part of EV wrote themselves out of the script in the EV play.