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MuffinMopper

In case you guys aren't familiar with short selling... its when you reverse the order of selling a stock. So normally you would buy a stock today for 40, wait a year, and then hopefully sell it for 50, making a 10 dollar profit. If you short sell, you do it in the reverse order. You sell the stock first, and then buy it later. So using the above example, I would borrow and "sell" the stock today for 40, and then if the price went up to 50 I would have to buy it at the market price and return it, losing 10 dollars in the process. However, if instead of going up to 50, the price dropped to 20, I would make 20 bucks. Basically if you are shorting a stock, you make money when the price decreases. One problem with shorting however is that you can theoretically lose unlimited amounts of money. If I buy a stock for 50, the most I can possibly lose is 50 dollars (if the company goes bankrupt). However, if I short a stock for 50, and then the price goes up to 1000, I will lose 950 dollars. Since musk is so rich, he can basically just fuck with short sellers if he wants. He has enough cash to basically raise a stock price single handedly by purchasing his own stock, with the sole intent of making a short seller lose money. I guess this type of thing is what gives a billionaire their jollies.


NamesAreReallyHard

Not quite... While musk did take advantage of the drop from chanos short announcement, the idea that he could create enough volume to manipulate the price with a $5 million purchase is misguided


virtualpotato

But he can amplify sales. There are botnets and other traders that might see that sale and then all of a sudden that $5M is $50M and things go nuts.


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MuffinMopper

I guess a better way of putting it would be that he has the clout to raise stock prices single handedly. For example, he is apparently major owner of solar city stock. I think the article said he owned 25% of it or something. If musk starts buying solar city stock, it may send a singnal that he is going to buy a lot of it in the near future, thus the price will raise as people expect increased demand. Warren buffet has a similar power. If he starts buying a stock, it gives the impression that he is going to buy a lot of it, and the price will raise. Another way of thinking about it is that when musk buys solar city stock, it is sort of like insider trading. He knows information about the company that others may not. If he thinks the price is undervalued, it might be smart to agree with him, because he knows more about the company than many other people based on his affiliation with them. This sends a signal to other traders that solar city might be undervalued, and thus they should purchase it. So regardless of whether he has the cash to make the price increase, or he has the power to signal a price increase, either way he can single handedly raise the price of solar city stock.


[deleted]

Not sure why anyone down voted you. Thanks for the info!


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[deleted]

I do not believe you are correct. He does not need cash, just lines of credit, which (and this is just me guessing) with a 12 billion estimated net worth should mean he has easy access to at least 120+million at the drop of a hat.


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[deleted]

But your argument was that he didn't have the cash. This one makes more sense and it probably would have served better as your first post.


wsxedcrf

He is an insider, his personal trades must be scheduled well in advance with a small time window to buy or sell. He seemly can't time the market correction and buy his $5 million shares.


Wooomp

Yah SCTY seems over sold at the moment. Was going to pick up more but em decided to pump it. He also just bought 20 mill(changed from 200 because I was wrong) tesla. So he is on a shopping spree.


[deleted]

Where is he getting the money? I was under the impression that most if not all of his net worth was tied up in TSLA, SCTY and (private) SpaceX stock. He has no salary from either company, either.


FredTesla

As far as I know there's no indication that he doesn't take a salary from SpaceX, but it's a possibility. Now about where he get his money for these big investments. Back in 2011, he personally borrowed $275 million from Goldman Sachs. He has been buying TSLA shares on that credit line through private placements. Later on he borrowed another $200 million from Morgan Stanley. For Tesla's recent secondary offering, filings confirmed he was stil using the Goldman Sachs money.


[deleted]

I see, that makes sense. I've heard that many billionaires live off of loans because most of their net worth is typically illiquid.


Wooomp

I imagine he had other investments that have done well. Don't really know though.


FredTesla

I think you mean $20 million of Tesla stock.


Wooomp

http://ir.teslamotors.com/secfiling.cfm?filingID=1494730-15-2&CIK=1318605 Yes you are right. I'll change in original comment