Tesla short sellers aka TSLAQ have been damaging the company’s market value also the investors’ equity value for over a decade. The U.S. Securities and Exchange Commission (SEC) received a request from a group of law professors to enforce stricter rules on short-sellers, like TSLAQ. The law professors specifically requested that SEC urge shorts to be more transparent when it comes to their trading activity.
The request was written by Columbia University professors John C. Coffee and Joshua Mitts, and sent to the SEC on Wednesday, February 12, 2020. In it, Coffee and Mitts et al. claimed that negative activism among short-sellers had increased lately.
Examples of negative activism in the lawyers’ petition included shorts using fake names to spread antagonistic information about a company in the hopes of driving its stock down. Tesla is no stranger to these tactics, which are also often used on supporters of the EV company to distort their credibility and intentions.
Tesla on the news - 1 year ago:— The Short Shorts Historian (@TeslaHistorian) February 1, 2020
"https://t.co/CoiBz4zM5B includes aerial photography from the Shorty Air Force, a group of pseudonymous researchers who fly over the company’s parking lots and delivery centers to count Tesla’s inventory cars."🤭🤭🤭https://t.co/4mSNZrm96m
Using fake names and spreading bad news can be summed up as Short and Distort, a tactic often used by the most aggressive and stubborn short-sellers. Short and Distort is actually illegal in the United States. However, the SEC seems to have a difficult time identifying when this tactic is used.
Under the safety of anonymity, shorts will often give advice to others interested in taking a short position with similar companies. According to Coffee, Mitts, and their colleagues, sometimes shorts continue to disseminate adverse news and advise others to continue shorting a company even after they have closed their bets to avoid market losses.
Within the Tesla community, it is well known that some TSLAQ do dispense negative news while encouraging others to continue shorting the EV maker’s stocks. However, the current positions these TSLAQ advisors hold in the company are often undisclosed. Only the brazen few continue to fight against Tesla with transparent faces, names, and positions.
I got a margin call on $TSLA yesterday and lost thousands...and do you know what? I'm STILL staying short on the balance because I STILL believe this company is a fraud. I would go short again today if I had to decide again. $TSLAQ— Steven Walter Thomas (@thethomasbrand) January 23, 2020
Needless to say, the lawyers said the activities described above were even more detrimental than using fake names to spread bad news.
“The commission should vigilantly ensure that short position disclosure, when voluntarily initiated by a short seller, remains truthful and accurate,” When a short seller has chosen to disclose a short position, failure to disclose that the position has been closed is doubly misleading,” wrote Coffee and Joshua and Mitts in their request to SEC.
Currently, Tesla is one of the most shorted companies, and it comes with some vile—often sickening—consequences. The Tesla community is well aware of the extent TSLAQ are willing to go just to bring the EV tech company down.
For instance, some TSLA shorts suggested sabotaging Tesla’s Autopilot test on the open road. The short-sellers’ plans were disseminated throughout Twitter. They advised people to use their vehicles to create obstacles for Tesla during its Autopilot tests. Unfortunately, some people listened to TSLAQ advice, and one did try to disrupt an Autopilot test, to the point when Tesla employees called for the police. Thankfully, no one was harmed, but that may not be the case in the future.
Hey @elonmusk - just letting you know that as we speak, short sellers are discussing trying to deliberately cause an accident with one of your FSD vehicles in order to make Tesla look bad. pic.twitter.com/q0XjhGFt7I— Nafnlaus (@enn_nafnlaus) April 16, 2019
So, remember my tweet about Tesla short sellers plotting to try to make a FSD car crash to make Tesla look bad (https://t.co/BVnnAyCOvA)? They've already tried - enough to trigger an emergency crash evasion maneuver. Petition for a restraining order filed: https://t.co/ijZ0qSNlxS pic.twitter.com/gJFICj5G5H— Nafnlaus (@enn_nafnlaus) April 20, 2019
Telling people to use their cars to deter another moving vehicle on the open road is not sound advice. Neither is it of sound mental capacity. TSLAQs advice back then—even in jest—was not appropriate and could have hurt people that weren’t involved in Tesla. Even if Tesla shorts were "just joking" about the matter, there is no denying the some didn’t interpret it as one.
SEC has yet to really address these concerns about TSLAQ. According to Bloomberg, it rarely passes rules based on petitions or requests like the one sent by Coffee, Mitts, and their colleagues. However, SEC has investigated Tesla and Elon Musk for claims made by shareholders and other people. So there might be a way to get SEC to listen—unless of course, the commission is curiously selective about the instances when it does its job properly.
Featured Image Credit: Tesla