Well after markets closed for trading last Friday, Tesla’s (NASDAQ: TSLA) CEO posted that he will not take the company private (for $420 a share). This effectively ends the run-up that sent the stock from below $300 to over $380 a share. The days of Tesla’s CEO playing games with short-sellers is over. While the U.S. Securities and Exchange Commission (SEC) is unlikely to do anything to punish Elon Musk, the CEO and the Board now must focus on the problem at hand: growing Tesla 3 production and squeezing the short-sellers.
TSLA short-selling volume is likely to keep going up as the company continues to disappoint on production number and on revenue growth. Short float stood at 27 percent recently. Although the company proved it could raise production of the Tesla 3, profitability of the low-end EV will deter the company from trying too hard to maintain last quarter’s rate of production.
Tesla may face longer-term secular trends that will hurt sales. In the province of Ontario, the company abruptly ended tax credits for consumers buying EVs. That includes Tesla models. Even though Elon Musk is suing the government, this dangerous trend of government pulling back support for EVs could hurt demand. As Tesla’s costs and debt grow but revenue fails to keep pace, holding TSLA stock could prove unprofitable.
