Tesla's bloodbath racks up a $1.4 billion profit for short sellers in just 3 days

As Tesla’s stock enters bear market territory, short sellers are laughing all the way to the bank.

They have raked in a whopping $US1.4 billion in profit this week alone as the stock has tumbled 13.6%, its biggest three-day decline since February 2016, according to data compiled by financial analytics firm S3 Partners.

Tesla short sellers have been waiting patiently for a bloodbath like this. Even as the company’s stock surged as much as 79% year-to-date through June 23, costing the speculators upwards of $US5 billion, they hung tight.

Short interest actually reached a record high of $US11 billion as recently mid-June before the traders pared the position slightly. As of Thursday, the measure still sat at nearly $US9 billion, according to S3 data.

Tesla’s stock price issues started in earnest on Wednesday, when Goldman Sachs said it sees the company’s production levels plateauing. As a result, the firm cut its 12-month price target on Tesla from $US190 to $US180. That’s roughly 40% below Thursday’s trading price.

It continued on Thursday amid signs of mounting competition. Volvo announced that all of its cars produced during and after 2019 will be either fully electric or hybrid. Additionally, Jaguar is set to release its first electric SUV, a direct competitor to Tesla’s Model X, in 2018.

But even amid all of this sudden negativity surrounding Tesla’s stock, speculators that have held the stock short for all of 2017 have still lost about $US3.4 billion year-to-date, S3 finds.

With that in mind, don’t expect them to give up their pessimistic view any time soon. While some short sellers may be closing out positions in order to take profit, S3 still sees short interest stabilizing in the $US9-10 billion range.

In other words, they have finally seen some results, and they’re not stopping now.

Screen Shot 2017 07 06 at 2.02.49 PMS3 PartnersTesla short interest has closely tracked the company’s stock price.

Get the latest Tesla stock price here.

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