[nelsonenzo]

I have no choice but to short Tesla stock, no matter how much I like the technology or company. Elon's 30B stake he put up to buy Twitter will have to be sold when the Twitter revenue dries up - and with advertisers and big names leaving that path is inevitable. He really doesn't realize that once you lose market penetration, your done forever no matter how nice you make it. Myspace taught us that. They had a beautiful revamp once upon a time, but it was too late. Facebook ate it's lunch. Same will happen here, only worse.

[toss1]

Excellent point, but how likely is a good outcome from this trade?

Assume that Twitter is 90% likely to tank at least badly enough that he has to cover the loans, and that $30B is entirely collateralized with TSLA stock (vs Twitter or some other assets).

That $30B is about 5.7% of the $527b market cap. Selling it all at once would certainly depress the stock. But would he have to do that, or just dump enough each month to make the payments? If that's over something like 5-10 years. it'd somewhat depress the curve, but enough to make a short work? If it's a 10-year timespan, it's more like 0.6% per year of 'extra' sales from the event, which seems getting down in the noise. Seems he's also make a variety of moves, e.g. a rollover loan, stock buybacks, etc. to minimize the impact on TSLA price...

What am I missing here?

[nelsonenzo]

Your analysis has some merit, but I still wouldn't agree overall.

First, he can't sell any of that 5.7%. Collateral is an all or nothing deal, like any other loan. Technically who ever collects it may not sell it either, they may hold onto it rather than dump it, but it is entirely their decision.

Second, he owns about 21% of TSLA (so the web tells me). And Twitter lost 1.14B in 2020. That is likely to be a steeper loss this year. Selling 1+B / year - with very little end in sight to the pain - will eat into his remaining 15% share. Liquidating 1+ B a year of stock is not a trivial amount and it will not be looked on favorably by investors. It will signal his pet project is more important than his very serious business - a business where investors have been all to happy to short in the past.

IDK, just my opinion. Not financial advice, obviously.

[toss1]

Thank you for the analysis; I was thinking of only the share-flow effects and not at the message the market takes from the situation, which, I think you are right, is likely to be even more important. Why shorting instead long-dated options?

[CogitoCogito]

> I have no choice but to short Tesla stock

How do you short a private company?

[plandis]

TSLA is publicly traded though?

[CogitoCogito]

Sorry brain must not be functioning. I read that a couple times as Twitter.