Tesla Short-Sellers Cash In on Fire Safety Concerns

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Nov. 13 (Bloomberg) -- Bloomberg’s Alix Steel and Bloomberg News’ Jeff Plungis discuss the safety concerns for Tesla after numerous vehicle fires and the resulting drop in Tesla shares. They speak on Bloomberg Television’s “In The Loop.”

This news.

The stock has plunged on a spare it really has.

It has been a pretty big blow.

Over the course of these three fires, the stock is down about 5%, but since that last fire, the stock has fallen 20 five percent.

It has wiped out over 6.5 billion dollars from market value, the biggest deadline this year among the 10 most shorted american companies.

Now, of course, it is a 200-day moving average that a lot of people are looking for.

Of course, if it breaks below there, every -- it is obviously far from the now, but if it breaks there, that is a very bearish signal their as well.

What about the other factors?

In the stock of had a big run-up.

It is still the best performing stock in the nasdaq for 2013. even elon musk said the high stock price is a bit distracted him a it was a bit higher than it should be.

On the other hand, the fires do raise questions.

Are there violations, safety standards?

Let's not forget that tesla missed some vehicle sales estimates, a day light.

Either way, this helps the short sellers who thought the stock was overvalued but then got rolled up here in the big stock market rally that we have seen.

Jeff, it is not up to elon musk whether or not his model s's are recalled, right?

Most definitely not up to him.

He can do a voluntary recall if they look at it and decide there is a problem.

I think what he was saying yesterday from what they have seen so far, they do not see a problem, but it ultimately will be up to the federal government, the national highway traffic safety administration.

Where do things stand right now with them?

What are they looking at?

Well, publicly they are not saying very much.

They are saying that they are consulting with the company.

They are talking to local authorities.

That is all they are willing to say right now.

They typically will not say very much in a very early phase of a problem.

They are not willing to say that it is even an official defect investigation, and they will not until they do some preliminary work to see if there is some kind of safety issue.

What they will be looking at is whether these fires, whether there were some unusual circumstances that caused the fires or whether the design is such that ordinary broke conditions could lead to a fire.

We have been talking to automotive experts over the last couple of days who are leaning more toward the you can't really plan for driving over large pieces of metal at high rates of speed.

But this does -- vista, though, are they the one to give a top rating to the model s? how damaging is it to this agency if they did -- if they do in fact find a flaw here that would warrant a recall?

Here they have rated this car company in this car the top -- the most safe car in the u.s. right.

There is a disparity there, but it is really because of the kind of test that that company does.

They test for some very specific things.

They run cars into frontal barriers at 30 miles an hour because that is the most common types of crash.

They don't really have a test for road debris.

That is what is happening with tesla.

Things are hitting the battery pack on the bottom of the car, and they deny have any kind of test for that.

That accounts for the difference.

Right, ok, that makes sense.

We will see.

Alix, i know you have been looking at the options market as well.

Right, you also have the options market.

Open interest for put, a more bearish indicator, reached a record of 484,000 contracts.

You have a senior equity analyst at cgm institutional services they short sellers who bailed earlier because of the stock market rally might be looking at put options to recover some kind of options, so they are adding fuel to the already negative fire.

I guess a bad pun right now.

The question of course is -- is this a bubble into tesla?

All right, alix steel, thank you so much, and of course bloomberg news guest monday in washington -- bloomberg news jeff plungis.

This text has been automatically generated. It may not be 100% accurate.

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