The story of a potential Tesla short squeeze is one we’ve been quiet about for a while. It has honestly been a little bit bewildering — Tesla [TSLA] has frequently been the most shorted stock on the US stock market, and at critical junctures where logic would tell you that short sellers would bail, few have done so.
As you may have seen, a longtime Tesla bear and short seller recently made a full, high-speed, screeching U-turn and starting supporting Tesla. The explanation included 4 CleanTechnica charts regarding Tesla sales versus the competition’s sales. But that was not the end of the story.
One of Wall Street’s most famous short sellers, Andrew Left of Citron Research, has been trying to make a mockery of Tesla for years. Five years ago Left crowed, “By the time this [Model 3] product is even approaching market, there will be multiple other 200-mile range plug-ins that have been out for years.” In turn, Left bet heavily against Tesla — sure that the electric automaker was doomed. Then, it all changed.
Supplementing this wonderful article by Peter Forman detailing the various ways short sellers are manipulating Tesla stock [TSLA], below is a portion of a superb piece published on the Harvard Law School Forum on Corporate Governance and Financial Regulation last November. Here’s the start of the article:
A great deal of attention has been recently placed on the conflict between Elon Musk and the Securities and Exchange Commission (SEC) regarding certain tweets by the CEO of Tesla. What is not clear to many, however, is the extraordinary number of potential securities violations that are happening regularly with regards to Tesla’s stock (NASDAQ: TSLA) that are the work of individuals opposing Tesla’s success. It’s fair to say that a war is presently underway between Tesla and its enemies.
Tesla shorts may be in for a treat, as Elon Musk has just set the stage for an unprecedented “burn of the century”. Tesla’s CEO set Twitter and financial media on fire last Tuesday as he revealed his plan to make Tesla private, withdrawing it from the stock market at a guaranteed $420 per share. What if Elon was telling the truth?
You don’t get much props for predicting something after it happened. This is sort of lame: “I knew that would happen. I didn’t say it, but I knew it.” So, I’m going out on a short limb and am making a prediction here in the open while the market remains irrational.
Tesla short sellers reportedly lost nearly $2 billion at the end of last week. Yes, two billion. If you thought all of the anti-Tesla FUD and media hype was coming from the most honest of places, think again. People don’t like to lose money. They normally like to make money.
Tesla has reached its artificial milestone of producing 5,000 Model 3s per week, and media outlets (and buyers) continue to post rave reviews. The company’s three vehicles are the three top-selling EVs in the US market. Model S has been consistently outselling every competing large luxury sedan for a couple of years, and it appears as if Model 3 will similarly dominate the small sedan segment. At least two sets of auto industry experts (Munro & Associates and a group commissioned by German automakers) have performed teardowns of Model 3, and concluded that the new EV should be earning a healthy profit margin. Does this really sound like a company in trouble?
One month ago, we got an email from IHS Markit. The market analysis firm had a totally unsurprising yet also shocking story to share — Tesla [TSLA] was a dramatically shorted stock. It’s unsurprising because this has been TSLA’s fate for years — it’s a favorite of stock shorters. However, it’s shocking because: 1) People and companies shorting TSLA have gotten absolutely burned in recent years and even months. 2) Model 3 production is ramping up — it’s certainly not at full speed and there have indeed been delays, but production is ramping up.
