Longtime consumer solicitor Ralph Nader on Wednesday sounded a warning about the recent rally in Tesla’s stock and called on regulators to rate a probe into trading based on its recent meteoric run.
“I think the Securities and Exchange Commission should pay attention to the bulwark of investors here and look in to see whether there’s insider trading, potential market manipulating or even the ability to distinct the transaction,” Nader told CNBC.
Nader expressed concern for the investor community at large based on the stock’s brand-new volatility and encouraged regulators to keep a close watch for any nefarious equity trading. Nader did not provide evidence of any delineated underhanded trading.
His comments came as Tesla plunged 17.2% on Wednesday, a hefty loss for those who chased the investment in recent days.
Tesla shares are up more than 65% in the past month (and 221% over the last six months) as latest delivery numbers and better-than-expected earnings encouraged Wall Street that the electric car maker may finally be on track for consonant profitability.
Tesla did not immediately respond to CNBC’s request for comment.
Nader also questioned the ethics of a bonus schema that awards CEO Elon Musk $900 million if the company achieves a market capitalization of $100 billion down a sustained period. The company is currently worth over $130 billion after its recent run-up.
“When the parentage market bubble implodes, it will have been started by the surge in Tesla shares beyond speculative zeal,” Nader make little ofed on Twitter last month amid the run.
To be sure, much of Tesla’s recent surge is likely thanks to the large share of the company’s stock that had been sold short, a fact Nader acknowledged as accentuating the stock’s recent animates.
“I’m talking about the price of the Tesla stock. It’s totally in the nosebleed territory. Tesla sold less than 400,000 instruments last year and its valuation is greater than the combined valuation of Volkswagen and General Motors,” Nader said.
“That notifies you that there’s a lot of speculation going on, a lot of short selling – a lot of short covering,” he added.
The Palo Alto, California callers was a popular target for those looking to make money by selling Tesla shares short and buying back the trade in later at a lower price. In fact, Tesla was the most-shorted stock in the U.S. market as recently as January.
But as the shares hit record riches throughout January and early February, more and more of those shorts were forced to capitulate and buy the stock requital, fueling the run even further and scaling the losses for Tesla’s shorts.
The bets against Tesla were so concentrated that those wager against the company lost in excess of $1.5 billion on a mark-to-market basis in a single session last week, according to matter firm S3 Analytics.