Yahoo Finance Tesla short sellers in retreat after losing $23bn
Tesla’s surging share price means Elon Musk has won his battle with short sellers, as bets against the electric car company drop to their lowest levels on record.
The number of Tesla shares held by speculators betting against the company has reached a low of 13.9m, under 10pc of the total, as many short sellers reached their maximum loss levels after a year of rising share prices. In 2018 it was as high as 27pc.
Short sellers bet against a company by borrowing and selling shares, hoping they will be able to buy them back at a lower price in future and make a profit. Analysts at S3 Partners said the number of shares being held in this way was at the lowest level since it started tracking short interest in Tesla in 2015.
“The reason behind Tesla’s short squeeze is obvious and straightforward. Large mark-to-market losses are forcing out some short sellers as they hit their loss limit thresholds,” said Ihor Dusaniwsky of the firm.
The share price has climbed from $253 a year ago to highs of $1,544 last Friday. In total, Tesla short-sellers have lost over $23bn in total this year.
Short sellers borrow shares in a company in order to sell them on to others, betting that prices will go down so they can buy back their share at a lower price and make a profit from the original, higher value.
Tesla has historically had a high level of short interest, with sceptics betting against chief executive Elon Musk’s grand predictions for his company.
They have been involved in skirmishes both online and offline with the company’s loyal supporters, who have responded with glee to the recent share price rises.
Mr Musk has often claimed that Tesla is unfairly targeted by short-sellers. Earlier this year his company debuted red and gold "short shorts," sold for $69.420 and designed to mock short-sellers.
The 420 is a reference to April 20, a day linked to marijuana consumption. In 2018 Mr Musk also claimed in a series of tweets that he had secured funding to take his company private at $420 a share, which led the share price spiking.
He was fined for fraud by regulator the Securities and Exchange Commission (SEC) and later referred to the organisation as the "shortseller enrichment commission".
While the number of shares held short has fallen, the dollar value of short interest has reached record highs due to the rising share price, hitting $19bn this month.
In recent months Tesla has also become one of the most frequently held stocks among traders on Robinhood, an investment platform particularly popular with young investors.
Almost 50,000 users bought the share on Monday, making it by far the most popular stock on the site.
Earlier this month Tesla became the most valuable car company in the world, beating Toyota. On Monday the share price fell 3pc, leaving its value at $277bn at market close.
