It’s been a tumultuous and, I imagine, frustrating, year for Tesla shareholders.
Getting into Tesla outside of an index fund means buying into a personality cult, and personality cults can be dangerous.
Elon Musk was never anyone’s idea of predictable or sedate, but he was generally considered to be a genius of some kind. 2022 was the year investors learned just what kind of genius. Musk, like Donald Trump, is “not smart, but genius… and a very stable genius at that!”
Trump’s infamous description of his own mental acuity (the former president also claimed that, “Throughout my life, my two greatest assets have been mental stability and being, like, really smart”) only served to heighten critics’ concerns about his fitness for office. Similarly, Musk’s contention that Tesla employees needn’t worry about the stock’s historic plunge could conceivably backfire, at least to the extent some workers already inclined to doubt Musk’s fitness for his own office view his remarks as detached from reality.
“Btw, don’t be too bothered by stock market craziness,” Musk said, in a letter of gratitude to employees obtained by Electrek. “As we demonstrate continued excellent performance, the market will recognize that,” he added.
Maybe. But, as the linked article gently noted, part of employees’ compensation is comprised of stock options, “and when the price drops 69% in a single year, that’s going to have an impact — both financial and on morale.”
Indeed. On Wednesday, I took a brief visual tour of the stock’s trials and tribulations. The shares have collapsed, for lack of a more apt description. Every $100 hypothetically invested at the highs is now worth around $30. There are macro factors which explain a significant portion of that value destruction, but Musk’s decision to buy Twitter and all that came with it, arguably undermined sentiment among some investors.
At the least, Musk’s adventures in surveillance capitalism raised myriad uncomfortable questions for Tesla shareholders, and gave shorts another excuse to bet against the stock. Those bets delivered a $17 billion windfall on paper in 2022, according to S3 Partners, whose calculations suggest Tesla was the most profitable short trade of the year.
Notably, that $17 billion in mark-to-market gains is the other side of an astounding ~$140 billion mark-to-market decline in Musk’s net worth, based on Bloomberg’s billionaires index.
Of course, Musk has tortured shorts for years, including and especially David Einhorn. At one point, he (Musk) famously threatened to incinerate investors betting against Tesla with makeshift flamethrowers produced by his Boring Company.
Whether shorts are vindicated by this year’s high speed collision for the stock is thus debatable. I’d note that the setup is probably conducive to a squeeze in the event Musk manages to restore confidence in his enduring genius.