Has Tesla’s Stock Bottomed?

Don’t buy what Musk is selling.

The first instinct when seeing Tesla (TSLA – Get Report) CEO Elon Musk’s purchase of almost $10 million in stock (as was the case Monday afternoon) is that the bottom is in. In a normal case, when a high-profile insider such as Musk gobbles up a chunk of a struggling stock it sends a signal to the market that the bad news likely is over. Or, at the very least, Wall Street has priced into the stock enough of the coming bad news.

But old rules don’t apply when it comes to the bizarre Musk.

 

Given his net worth of roughly $20 billion and his child-like actions, he could have bought the stock simply to mess with the heads of the short-sellers attacking him on Twitter. Tesla’s stock is the most heavily shorted in the entire market. Keep in mind that things likely will get worse before they get better at Tesla, and that’s a reality Wall Street is still not pricing into the stock. Musk deserves a pat on the back for a willingness to ride the stock down even lower, but average investors would be wise not to take the trip with him.