When investors short a stock, they are betting it will go down by selling borrowed shares. However, it the price rises, many of those investors are forced to buy back those shares in hopes of avoiding even more losses. That new buying can, in turn, drive a stock even higher, a dynamic known as a short squeeze.
The latest production miss, though not as bad as many expected, drew probing questions from several analysts during Tesla’s recent earnings call.
Musk, seemingly frustrated by what he characterized as a string of “boring, bonehead questions” from Wall Street, cut off RBC Capital Markets analyst Joseph Spak to take questions from Galileo Russell, a 25-year-old retail investor.
Spak later responded to Musk in a note to clients, assuring the chief executive he plans to “hold Tesla accountable” for its performance.
“Some of these questions can seem dry, boring or short-term focused, but hopefully you can appreciate that anyone looking to invest in Tesla’s future must first be comfortable with its present,” Spak wrote earlier this week.
For his part, Musk defended his unusual behavior last Friday, tweeting “The ‘dry’ questions were not asked by investors, but rather by two sell-side analysts who were trying to justify their Tesla short thesis.”
Despite Musk’s characterization of Spak and Bernstein analyst Toni Sacconaghi as short sellers, the two have hold ratings on Tesla’s stock.