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Published on February 26th, 2017 | by James Ayre

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Short Sellers Have Lost ~$2 Billion On Tesla In 2017

February 26th, 2017 by  



Those shorting Tesla stock (short sellers) have lost nearly $2 billion so far in 2017, according to recent reports. I guess that this explains the frantic tone to many of the recent Tesla hit pieces on Seeking Alpha?

The thing about Tesla stock, which the short sellers don’t seem to grasp, is that many of those investing in the company are doing so for “political” and/or “environmental” reasons. In other words, for reasons that aren’t simply financial — which means that it’s a lot harder to spook them than is the case with those pursuing purely gain-oriented bets. (Obviously, some people are trading Tesla stock simply because they see money-making opportunities, but I’m skeptical that this represents a majority.)

Reuters provides more:

Short sellers have been at the losing end of a tug-of-war with Tesla Inc investors in 2017, with some surrendering in recent weeks following nearly $2 billion in losses as shares of the electric car maker approach record highs. …

The stock has surged 41% since President Donald Trump’s November election, surprising many who predicted the company led by billionaire Elon Musk would suffer under a Republican government averse to supporting clean-energy companies with federal tax subsidies.

In 2017, traders have suffered paper losses of $1.95 billion betting against Tesla by shorting its shares, equivalent to 23% of the stock’s average daily short interest during that time of $8.5 billion, according to an estimate by S3 Partners, a financial analytics firm.

On Monday, short interest was $8.1 billion, down from a high of $9.5 billion at the end of January after some traders bought back shares to avoid additional losses, according to S3, a process known as short covering. …

Short interest in Tesla has receded from record levels of 22.2% in November, but remains elevated. At the end of January, 21.3% of Tesla’s outstanding shares were sold short, a higher portion than any other US company with a stock market value above $10 billion, according to Thomson Reuters data.

A comment from an expert is always a bit dubious with stocks, but Reuters was sharp to get one from a prominent former Tesla short: “People are covering like crazy. That’s why it’s gone up so much,” commented Vilas Capital Management CEO John Thompson, a Tesla short seller for over a year.

While some “critics” have claimed that Tesla’s current production plans for the Model 3 are “unrealistic” and have used that as a basis for their stances on the company’s stock, it’s notable that everything is apparently running smoothly with the production ramp up so far.

Still, the stock may well see some large fluctuations around July or so (when we’ll know far more about the state of the production ramp). Though, I wouldn’t expect any major changes to the stock price before then … (I may well be wrong).

Something that’s very notable is that recent filing data has made it clear that mutual funds are betting on Tesla more and more as time goes by. Reuters states: “The number of funds reporting new positions in recent quarterly filings has jumped 79%, while the number of selling out dropped by 44%, according to Morningstar.”

Related:

Tesla Model 3 Progress, Gigafactories 1–5, Tesla Insurance … (Tesla 4th Quarter & 2016 Financials Call & Report)

Tesla Model 3 Production On Track For >5,000 Units A Week By End Of 2017 & 10,000 Units A Week In 2018

Is Tesla’s Business Model At Risk From Republican Repeal Of EV Tax Credit — Forbes Rebuttal

 
 





 

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About the Author

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy.



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