Tesla Inc. : A Canadian carpenter claims to have made his fortune by betting on Tesla…Before losing everything

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(BFM Bourse) – Christopher DeVocht claims to have earned more than 400 million Canadian dollars by having his nose on Tesla, before seeing his gains go up in smoke. According to him, his bank is responsible for his mishap.

This is the story of Christopher DeVocht, a Canadian carpenter, who fell short by investing in one of the most emblematic stocks on the American stock market: Tesla. He was at the head of a nice jackpot of more than 400 million Canadian dollars, or 275 million euros. Before his stock market outlook turns into a nightmare since he lost everything…

At least that’s what he says in legal documents. According to him, his bank and an accounting firm gave him bad advice.

Christopher DeVocht therefore decided to take the case to court in order to obtain compensation for the damage suffered. This mishap, spotted by Bloomberg, was picked up by several American and French-speaking media including Radio Canada.

Like many Sunday traders, Christopher DeVocht said he enjoyed browsing stock forums for investment advice on his favorite stocks, including that of the American electric car manufacturer. However, he indicated in his complaint that his financial knowledge was limited. Which, according to him, his advisors did not take sufficiently into account.

At the end of 2019, Christopher DeVocht held 88,000 Canadian dollars, the equivalent of 60,000 euros, in an account opened with the brokerage division of Royal Bank of Canada. The carpenter trader wanted to make this money grow by placing it in derivative products, such as options on Tesla. The goal: to buy a house to finally leave your rented apartment.

Exceptional added value

A few months later, the young amateur trader’s purchase plan was fully mature. Christopher DeVocht went to his bank, the Royal Bank of Canada, to obtain a loan. In the summer of 2020, his portfolio was worth approximately 26 million Canadian dollars (17 million euros) and its value was “increasing rapidly”, according to the notice of civil action filed with the Supreme Court of British Columbia in Vancouver, cited by Bloomberg.

His bank quickly referred him to an in-house wealth manager who then put him in contact with an accountant from Grant Thornton, according to the complaint. These specialists, according to the complainant, would have advised “to accumulate as many Tesla shares as possible and to keep them for as long as possible”. This created a risk of concentration, continues Christopher DeVoch. He also explains that his advisors also recommended that he create a structure to transfer all his assets to Tesla in order to benefit from lower taxes on his investments.

The beautiful story between the carpenter trader and Tesla was, at that time, in good shape. In 2020 and 2021, Tesla was undoubtedly the star of the markets with a stock which had soared by more than 1,000% over these two financial years. So much so that this stock market car weighed 32% of the CAC 40 in October 2021.

The stock market ride of Elon Musk’s company was profitable for Christopher DeVocht’s portfolio, the value of which increased from 186 million Canadian dollars (123 million euros) to 415 million Canadian dollars (275 million euros) in for approximately eight months in 2021, it is noted in the complaint. Before these copious gains were wiped out with the fall of more than 60% of Tesla shares the following year, due to difficulties at its Shanghai site and the rise in interest rates.

“Inadequate advice”

The unfortunate amateur trader caught in the panic explains that he tried to limit the damage by borrowing 20 million Canadian dollars (13.3 million euros) from his own company and using them to carry out shorter-term transactions on his personal account to recover part of your investment. Also, he had to sell Tesla shares at a much lower price to repay his loan.

“Without the ‘inadequate advice’ received by Christopher DeVocht from RBC Dominion Securities, RBC Wealth Management and the accounting firm Grant Thornton, he and his company ‘would have preserved a substantial portion of their assets and implemented financial planning which would not have resulted in the loss of their entire net worth’, it is also indicated in the complaint cited by Bloomberg.

The carpenter also criticizes the Royal Bank of Canada for having advised him to invest 25.5 million Canadian dollars (17 million euros) in its charitable fund. Which, according to the complaint, contributed to the erosion of a large part of the value of his portfolio.

RBC Dominion Securities and RBC Wealth Management declined to comment on the matter to Bloomberg. “The only statement we can make at this stage is that we are committed to providing quality services to all our clients in accordance with professional standards,” Grant Thornton said in a statement.

This story is reminiscent of another stock market masterstroke carried out in 2022 by an amateur trader, but with a much happier ending. Jake Freeman, a 20-year-old American student at the University of Southern California, managed to win $110 million (100 million euros) by betting on Bed Bath and Beyond.

This student had invested 25 million shares at less than 5.50 dollars (5 euros) of the home goods distributor in bad shape. He took his gains at the right time, as the company subsequently saw its share price collapse.

Sabrina Sadgui – ©2024 BFM Bourse

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