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Disclosure: The author has a short position in one or more of the shares mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
It’s looking increasingly like Elon Musk’s go private “funding secured” tweet on the 7th August has backfired horribly as Tesla (NASDAQ - TSLA) now trades $40 below the prevailing price before he sent it. I was recently accused of confirmation bias on Tesla, i.e. of looking only at the bear case and ignoring the positives but it is difficult post-tweet to find any bullish case that holds water.
Beforehand, one could perhaps argue that Musk’s lies and deceptions were part of the package that comes with a visionary genius and that although he had promised that Tesla would be cash flow positive in Q3 and therefore self financing from hereon in, no one really believed him and there would be plenty of willing investors to throw a few more billion into the mix for one more heave to get him over the line before the competition arrived.
This view is somewhat flaky but, with enough traction, it might at least have kept the show on the road for a year or two before the inevitable ending. But things look rather different now.
Even the most optimistic investors, blinded near the crest of the longest bull market in history, will have difficulty stumping up cash for a company being investigated by the SEC for criminal misdemeanours, and also potentially liable for billions of dollars which it doesn’t have in class actions by just about anyone, bull or bear who lost money trading the stock between the 7th and the 24th of this month when the “deal” was exposed as a sham (after hours on a Friday night, on a company blog rather than an 8k, naturally).
Musk has ensured that his every action is under even more intense scrutiny than before that tweet, the exact opposite of what was intended by it, and he has shown no indication that he has learned to cope with the attention. If anything, his behaviour has become more erratic and unstable, as evidenced by his sniveling interview with the New York Times (even this cringe-fest was packed with easily proven lies). Only yesterday he appeared to repeat his “pedo” claims made about the British diver in the Thai cave rescue (a nasty bit of petulance that appalled even his most ardent supporters), by questioning why he hadn’t sued him.
As I write the stock is breaking below $300 and Musk’s self-destructive folly looks to ensure that it will trade a lot lower a lot sooner. It is by no means too late to sell.
This article first appeared on the Nifty Fifty website which Tom Winnifrith runs with Steve Moore & Lucian Miers. To access the website ahead of the next share tip from Tom & Steve and a new shorting piece from Lucian shortly click HERE
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