Short sellers are getting steamrolled by the rally in Tesla.
The company’s shares have soared more than 40% since the company closed on its acquisition of SolarCity. Traders who bet against the stock have been saddled with a loss of 31%, or
$2.3 billion when taking into account financing costs, according to S3 Partners.
Bets against Tesla surged since the beginning of November as investors like Greenlight Capital’s David Einhorn have targeted the company for “years of under-promising and over-delivering.”
In the weeks following the January 3 announcement that Tesla missed its 2016 deliveries target, short interest climbed to more than 35% of the float, or shares available to the public. But the stock kept rallying, and the shorts continued to pile in. As of Tuesday, short interest totaled $9.2 billion, its highest on record, S3 says.
“Having weathered over $2.3 billion of losses in three months, it might take a large price move to squeeze out these shorts, but if they begin to cover their positions there would be several billion dollars of buy to covers hitting the tape providing quite a tailwind to Tesla’s stock price,” S3 said.
Tesla is scheduled to report its fourth-quarter results on February 22. Wall Street is currently expecting a loss of $0.75 per share on revenue of $2.09 billion.