Elon Musk is wrong to praise Japanese giant's block on short-selling
Nikkei -- Dec 09
When the infamous Elon Musk of electric-car company Tesla praises your business strategy, you may be on the wrong side of an issue.

That means you, Japan's Government Pension Investment Fund.

Billionaire Musk has a particular knack for tweeting himself into trouble. His was slapped with a defamation suit for calling a British diver living in Thailand a "pedo guy," though a Los Angeles jury decided in Musk's favor late last week. Musk also got into hot water with the U.S. Securities and Exchange Commission for tweets about taking Tesla private.

Last week on Twitter, he found something he liked, heaping praise on GPIF, which had announced a suspension of lending stocks for short-selling purposes. It called the practice of borrowing shares to bet against companies unethical. "Bravo, right thing to do! Short selling should be illegal," Musk tweeted.

GPIF is the globe's biggest pension fund and the move affects more than $391 billion of shares the fund holds in its foreign equities portfolio.

Since Musk's company has been the constant target of short-sellers, given its failure to meet production targets, it is not surprising he had common cause with GPIF. But GPIF's move reflects its complacency, which is a problem for companies at home and abroad.

One can debate the merits of short-selling. Musk derides such traders as "value destroyers" and "jerks who want us to die." He has long complained that short-sellers do not understand Tesla's business strategy. Musk has claimed, too, that they are "constantly trying to make up false rumors" to turn a profit at the expense of shareholders.

Tesla Gigafactory 3 in Shanghai pictured during construction in October: Elon Musk's Tesla has been the constant target of short-sellers. © VCG/Getty Images

Or is it that he cannot take the heat? Tesla is one of America's most targeted companies when it comes to short sales. Roughly 21% of its publicly-traded shares -- or $9.5 billion -- are on loan, according to S3 Partners.

GPIF's reasoning -- which I do not accept -- is that short-selling falls foul of environmental, social and governance concerns and it worries that lending out shares is counter to its stewardship responsibility over underlying investments.

Fine, but the practice can also be a healthy counterbalance to corporate hubris and spin, say, when a CEO who has not quite got the making-cars-on-schedule thing thinks it wise to dabble in missions to Mars, underground highways, linking human brains to computers or sending tiny submarines to rescue people trapped in a Thai cave. Yes, this is also Musk.

News source: Nikkei
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