Bets Against Tesla Motors Hit Fever Pitch

4/15/14 9:05AM EST

Bets Against Tesla Motors Hit Fever Pitch Bets Against Tesla Motors Hit Fever Pitch

Image via Flickr/ Steve Jurvetson

Which of the 100 company’s that Nasdaq lists as its most important do you think is the most overvalued? There’s an argument to be made for several big firms. Blackberry Ltd (NASDAQ:BBRY) doesn’t appear to know what it’s doing, Amazon.com Inc. (NASDAQ:AMZN) doesn’t make any money, and teens are deserting Facebook Inc (NASDAQ:FB).

If short interest is anything to go by, the most over-valued company on the Nasdaq-100 is considered to be Tesla Motors Inc (NASDAQ:TSLA). The company hit below $200 for the first time since February on Monday, and downward pressure appears to be a de facto worry for investors in the company.

Tesla Sheds Value As Momentum Crumbles

The momentum bust of early 2014 hit many of the hottest stocks on the market. A company like Tesla Motors Inc (NASDAQ:TSLA) has its value locked up in speculative ideas about the future. That makes its dollar value pretty variable, explaining the 350 percent gain over the last twelve months, and the 20 percent decline since the end of February.

Companies like Netflix Inc (NASDAQ:NFLX), Twitter Inc. (NYSE:TWTR) and LinkedIn Corp (NYSE:LNKD) have all lost significant value since the start of the year. Tesla Motors Inc (NASDAQ:TSLA) has followed them as investors became increasingly nervous about the valuation of some of the more popular stocks out there. Now investors who like to play short are betting against those firms, and Tesla Motors Inc (NASDAQ:TSLA) is in the lead.

According to a report from CNBC, the electric car maker is now the most shorted stock on the market. The data for the report came from research firm Markit. The company says that about 15% of Tesla’s shares are currently being held short. About 2.95 of the shares on the Nasdaq-100 composite are held short according to the report.

Shorts On Tesla Are Still A Risky Bet

Despite the massive amount of shares held short, betting against Tesla Motors Inc (NASDAQ:TSLA) is a risky move. The company has eaten into the portfolios of many short sellers in the past, rising in value by about five times since the start of 2013. When you sell a company short you pay fees, and you lose when the firm’s shares rise, that takes money out of your pocket twice over, and Tesla Motors Inc (NASDAQ:TSLA) has proven a non-linear relationship with anything like the real world.

Tesla Motors is an incredible company, but its stock is dangerous for the average investor. Going long on Elon Musk’s firm is shaky enough, with its incredible P/E, but going short is asking for trouble. Those baying for the company’s blood have been maimed in the last year. Tesla may fall, but few enough will have had the right timing to benefit from the decline, most will be recuperating fees, and hoping to break even.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.

 
 

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