Elon Musk ‘Greatly Encouraged’ by Justice Department’s Investigation Into Short-Sellers

by Michael Freeman
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Short sellers have long since been something that has annoyed SpaceX CEO Elon Musk. Luckily for him, the Justice Department is investigating short sellers, leaving Musk “greatly encouraged” by its actions.

Elon Musk spoke to CNBC about the new investigations, while firing another shot at the Securities and Exchange Commission. “I am greatly encouraged by the Justice Department investigating short sellers,” Musk told the outlet in an email Tuesday. “This is something the SEC should have done, but, curiously, did not.” This comment comes after the Justice Department said it would specifically investigate two investors. Coincidentally, these two previously shorted Tesla’s stock.

The Wall Street Journal also covered the DOJ’s announcement and provided specifics. The department said it is focusing on alleged instances of “spoofing” and “scalping.” The former is when someone illegally fakes orders to either pump or crash a stock price. The latter is activist investors close out of their position, but don’t disclose they did so.

Muddy Waters Research founder Carson Block previously shorted Tesla stock and is reportedly among the investors served a search warrant. Another is Andrew Left, who also shorted Tesla once in the past. Federal agents seized his computers as part of the investigation.

Musk also discussed his ire with investment firms focused on short selling to make money to CNBC.

“Too often, sophisticated hedge funds have used short selling and complex derivatives to take advantage of small investors,” Musk stated. “They will short a company, conduct a negative publicity campaign to drive the stock price down temporarily and cash out, then do it all over again many times. The term for this, as you may be aware, is ‘short & distort.'”

Elon Musk’s SpaceX Split Its Stock 10-for-1

Short selling isn’t the only news regarding stocks Elon Musk disclosed recently. Last week, he split the value of its common stock 10-for-1.

CNBC also learned Musk split SpaceX’s common stock 10-for-1, with the company’s valuation reaching more than $100 billion. He sent the news out to SpaceX employees in an email the outlet obtained. In it, he stated for each share of SpaceX stock owned as of Thursday, the holder now has 10 shares. “The split has no impact on the overall valuation of the company or on the overall value of your SpaceX holdings,” the email said.

SpaceX stock was valued at $560 per share during its most recent sale, but now common stock will equal $56 a share. Companies occasionally do this, such as Apple or Google-parent Alphabet, though SpaceX has never done so until now. In most situations, a company does this to make shares more manageable and accessible.

With a single share costing $56 as opposed to $560, people may be more inclined to invest. Considering SpaceX’s valuation has soared the last few years, now seemed like a good time for the split.

Outsider.com