Short-sellers are good for markets

Elon’s not a shorts man

IT IS a stressful time to be an investor in Tesla. On September 29th shares in the electric-car manufacturer soared by 17% after its boss, Elon Musk, settled fraud charges with America’s Securities and Exchange Commission (SEC). Just days later, on October 4th, a series of belligerent tweets by the firm’s outspoken founder sent shares tumbling by more than 7%.

The tweets in question, like many of Mr Musk’s market-moving social-media posts, were targeted at short-sellers, who aim to make money by selling borrowed shares and buying them back later at a lower price. With a quarter of its publicly traded shares lent out to facilitate short-sellers’ bets, Tesla is one of the most heavily shorted companies in America. Mr Musk has publicly feuded with short-sellers for years, calling them “haters”, “jerks” and “not supersmart”. Research suggests that such insults are undeserved. Short-sellers are savvy investors who help to keep the market’s…

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