The Canadian Association of Professional Employees (CAPE) is calling for public pension funds to divest from Tesla. To show solidarity with American workers facing attacks from Elon Musk and his so-called Department of Government Efficiency (DOGE), the union says it’s time for the Canadian Public Sector Pension Investment Board (CPSIB) to dump its Tesla shares.
Despite holding no elected position in United States President Donald Trump’s administration, Musk and his DOGE are firing public servants with reckless abandon, placing the entire American federal public sector in jeopardy. Essential workers at the departments of education, health and human services, energy, veterans affairs and defense, as well as the Internal Revenue Service, the National Park Service, and the Consumer Financial Protection Bureau have been summarily fired, furloughed, or pressured to accept dubious buyouts.
In response, CAPE, which represents more than 27,000 Canadian federal public servants, is leading the charge to pull Canadian public pension investments from the controversial electric automobile maker.
At the risk of seeming like a jerk, I’ll state the obvious: market prices are set by the intersection of supply and demand.
In theory the fundamental value of a share is the fractional ownership in that company. If the company is successful then shares will have value relating to dividends or if the company is sold, etc.
However in practice the supply and demand of these shares is not required to be rational. People can have irrational preferences for shares, hype men can sell wild fantasies about the future, and so forth.
Back to your your more specific question, the share prices of Tesla have been completely disconnected to the value of the company for quite some time now. This is not opinion, this is plain observation of the valuation of the company relative to its revenues or profits or growth potential.
What is opinion is why that valuation has been irrationally maintained for years. My opinion that Musk has done a successful job in cultivating a cult audience around him of financially-motivated hype men who join him in promoting the prices regardless of their actual value.
Musk and his cult manipulates the media, both mainstream and alternative, with lies and publicity stunts painting a false narrative of future potential. Self driving cars, robotaxis, AI nonsense, and much more.
The regulatory bodies who should be stopping this fraudulent behaviour have responded meekly in the past, and now in Musks home country have been largely dismantled. This further encourages the cultists to continue their cycle of hype, disconnected from reality.
In my opinion, I find it likely many investors are well aware that Tesla is a bubble valuation. However so long as the hype machine continues, Tesla share prices can be a speculative investment as long as you can sell to a “bigger fool” later. No one knows when the bubble will burst, so much like penny stocks or meme coins it can be a gamble worth taking for some.
Back to the article for a second. In no uncertain terms, pension funds or anything of the like should not be gambling their funds on this house of cards.
I agree with everything you said and you don’t sound like a jerk.
I’m baffled at who is buying this stick at these prices. I’d short it but if I shorted it when I thought it disconnected from reality if have lost a lot ofoney by now.
Edit: original version had a typo, I don’t feel OP was a jerk
TL;DR: shorting can be an extremely dangerous proposition, tread carefully and warily.
An anecdote about shorting stocks: A close friend of mine heavily shorted RIM in early 2009 when the writing was on the wall about the success of Android and iPhone.
However the stock proceeded to double in the months following, eventually squeezing my friend substantially and generating a very significant loss.
So this person was right about the future value of RIM as a company, and was even right about the reasons — but still lost out big time.
Even in case where the stock prices don’t squeeze you out, the carrying costs can be significant and easily eat all of the profits if you get the timing wrong. Most people should never short a stock.
That’s why I basically don’t short stocks. The possible amount of how much you can lose is unlimited, and as you said being wrong about the timing is also a killer.
Omg, shorting RIM in 2009 would have been really stupid even though yes, the writing was on the wall.
There was a lot of national interest in keeping RIM afloat because it was basically our (Canada’s) first modern tech company to have wild success beyond our own borders. A lot of random people had very positive views of the company.
I didn’t really see a huge dip in support for RIM in the media until around 2012 or so. That would have been a way better time to short. But as you say, most people should never short a stock – it isn’t simple or easy to tell when to do it or when to stop.
I mean especially in hindsight it absolutely was dumb, I can’t argue against that. And it was certainly a mistake to bet so much without having cover.
At the time I agreed with this person that their analysis of RIM as a dead company walking was correct. In fact I was likely partly responsible for their outlook (though not their reckless position).
As you say —the national interests and hope in RIM’s success kept the price at irrational levels. Much like I argued here that Tesla is staggeringly overvalued today… which is why I made the comparison in the context of someone wanting to short Tesla today. It doesn’t matter if you’re right, for shorts it also matters when you’re right.