Investor's Corner

Tesla (TSLA) shorts have lost $2 billion in June as stock continues rise

It is currently not a good time to be Tesla (NASDAQ:TSLA) short-seller. According to financial analytics firm S3 Partners, Tesla shorts have been hit by more than $2 billion in mark-to-market losses so far this June, as the electric car and energy company rides a wave of optimism in the weeks leading up to the end of Q2 2018.

Tesla stock has risen 20.5% so far in June, making the Elon Musk-led company on pace to hit its biggest monthly gain since August 2014. This sudden boost in the company’s stock has managed to hit short-sellers hard. After Tesla’s 2018 Annual Shareholder Meeting, shares rose 9.7%, and shorts lost $1.1 billion in a single day.  Just this past Monday, shorts lost another $549 million in mark-to-market losses, and as of Tuesday afternoon, bears were down an additional $278 million.

According to S3 Partners head of research Ihor Dusaniwsky, the massive losses incurred by Tesla short-sellers so far this month has made the electric car and energy company the worst-performing stock for short-sellers this year. In a statement to Reuters, Dusaniwsky noted that the recent blows received by Tesla shorts are among the biggest losses he has seen to date.

“In all of 2017, they (short-sellers) were down $3.4 billion. To lose $2 billion in a month stands out as one of the biggest losses for a stock that I have seen,” the S3 Partners head of research said.

Tesla shorts could have lost far more, however. During Tuesday’s intraday, Tesla shares rose by as much as 6.9% to a 3-month high of $354.97, before settling down to a 3.21% gain at $342.77 per share amidst news of the company’s restructuring efforts that cost 9% of its employees. By Wednesday’s pre-market, however, Tesla shares appear to have recovered, rising 1.38% and trading at 347.50 per share.

Tesla remains as one of the most-shorted stocks in the market today, with short interest currently standing at $12.6 billion. That’s 37.9 million shares, or almost 30 percent of the share float sold short. Despite the recent losses incurred by Tesla short-sellers, however, Dusaniwsky noted that Tesla bulls’ anticipated “short squeeze” has not even started yet. A short squeeze happens when shares of heavily shorted companies such as Tesla rise as traders rush to buy stock to cover their short bets. This has not happened to date.

“With almost 80 million shares traded in June, this slight short covering did not move Tesla’s stock price. This is the biggest cry wolf on Wall Street – everyone says short squeeze, and it never is. They will be right one day, but not today,” Dusaniwsky said.

After Tesla’s successful 2018 Annual Shareholder Meeting, the Elon Musk-led company’s stock has seen a meteoric rise. Earlier this week, Berenberg raised its price target for Tesla to $500 per share, citing the company’s tech advantage and the Model 3’s positive gross margins. KeyBanc Capital Markets also sent out a note to clients on Monday, stating that Tesla could possibly deliver as many as 30,000 Model 3 for the second quarter.

As of writing, Tesla stock is trading up 1.38% at 347.50 per share on Wednesday’s pre-market.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

Tesla (TSLA) shorts have lost $2 billion in June as stock continues rise
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