Wouldn't that mean that you have bad security anyway, since you were easy to infiltrate (it cost less than the bounty)?

This analogy only works if you view the economics through the singular, zero-sum lens of Tesla. Imagine you have billions of dollars in big oil, or traditional auto manufacturing. If you can take a few percent of your net worth to establish a short position on Tesla, and in so doing create market weariness that could help bring down the company, then that would be a good investment for you overall even if you are unable to recover any of it (because your external holdings stand to benefit or be harmed accordingly). The fact that you stand to benefit directly on the short if you succeed is just icing on the cake.

This works both ways.

Your short position depresses prices below "value", which means that for example an eco-friendly sovereign fund could move in and buy the shorted stock with a discount, if they believe that it's unfairly targeted.

Why would the hypothesized petroleum/automotive tycoon care about that? She doesn't care if a sovereign fund prospers. She just wants to hurt Tesla.

Because in this case there is no hurt towards Tesla. She literally transfers money from her pocket to the sovereign fund pocket with zero hurt on Tesla.

Well yes that's how stocks work: the firm is not involved directly when they change hands. (Although you have it backwards here: the sovereign fund is buying so the money leaves its "pocket".) However, a firm like Tesla (and really, most corporations are like this) is still dependent on capital markets. They might want to issue stock in future, and they definitely need a steady stream of short- and medium-term loans to keep operating. A lowered stock price makes that more difficult. Short selling is still perfectly legal, but it does seem a bit sketchier if the tycoon is selling short not to make money from that investment but to protect other investments...

No, I got it right.

Price was 50, tycoon shorts it down to 45, sovereign fund starts buying until it's back to 50 (let's say they got average price 48), now price is back to 50, yet tycoon is short and if he wants to exit his buying will push price to 52.

So he literally allowed the sovereign fund to buy the shares cheaper, and he paid the delta.

Of course, now price might go up or down, we don't know who ultimately wins.

The thread hypothesis is that the tycoon is selling short. Full stop. You suggested that a sovereign fund might also buy long, which would entail the fund paying money and receiving stock. Full stop. All of this feel-good narrative about what happens next is merely imaginative supposition, unrelated to the discussion.

I don't think you quite understand how financial markets work and how P/L (profit and loss) is computed.

You should read about how the Hunt Brothers tried to do a thing like this to silver (artificially depress it's price) and how they got burned really hard because smart people saw through it and got on to the other side of the trade.

https://en.wikipedia.org/wiki/Silver_Thursday

Oh good grief. The fact that some short-sellers, sometimes, lose money (just like long-buyers!) has fuck-all to do with "how P/L (profit and loss) is computed". As you've got it all figured out, by all means go long on Tesla. Apparently it's free money...

'freerobby had a good point, somewhere up the thread. I regret taking part in your inane and patronizing distraction from that.

If it were so easy to short your competition into the ground you would see Coca Cola short Pepsi, IBM short Microsoft, Adidas short Nike and so on.

The fact that it doesn't happen should tell you that it's not such a clever idea as it might naively seem. And I just gave one example of how such a strategy could back-fire, by attracting long term investors who like to buy at discounted prices.

It's not "easy" (or common) because a lot of unusual things need to line up for it to work. You need an established company with big pockets, a new company that poses an existential threat but which also desperately needs cash, and a credible enough narrative that you can push to the financial markets, to get picked up by the business markets, and create a feedback loop.

The examples you gave don't fit the model. They are all profitable, they do not constitute an existential threat as Tesla does to big oil, and the relative differences in market cap is nowhere near as big between the parties. It's hard to overstate the proportions here -- the entire $12B of short interest in Tesla represents less than 2% of the Big Oil market cap. And that's without touching Aerospace/foreign governments that might want to starve SpaceX by way of Tesla.