A Tesla Short Squeeze Years In The Making May Have Finally Arrived

After years of teetering back and forth between financial disaster and a breakout boom, Tesla Inc's TSLA stock once again appears to be on the doorstep of a massive short squeeze.

On Friday, S3 Partners analyst Ihor Dusaniwsky said Tesla’s 126% rally since its June lows have it on the brink of what could be an explosive short covering event.

On June 3, Tesla short sellers were having a great 2019 and were sitting on a $5.1 billion year-to-date profit with the stock down 46% on the year. Since that time, Tesla shares have caught fire, and short sellers are now down $2.43 billion overall in 2019 heading into the closing days of the year. In fact, Dusaniwsky said Tesla shorts are down $1.16 billion in mark-to-market losses in the past week alone.

Squeeze Coming?

The good news for Tesla shorts is the stock has avoided a classic short squeeze up to this point. Tesla’s short interest has fallen by 18.2 million shares in 2019, a decrease of roughly 42% from the start of the year. It has dropped by another 3.2 million shares in December alone, but Dusaniwsky said the outstanding value of Tesla’s short position is actually up about $2.47 billion since June 3 thanks to the rally.

However, the recent push to all-time highs above $400 is now starting to test Tesla short sellers’ pain tolerance.

“Tesla shares shorted have not dipped below 20 million shares since mid-2013, but as its stock price keeps hitting historical highs we can expect short covering to accelerate as short mark-to-market losses mount,” Dusaniwsky said.

Tesla’s short interest currently sits at $10.29 billion, meaning another 10% rally (to around $445) would create an additional $1 billion in losses for short sellers.

“What was a seven month long ‘hug’ is turning into a full-blown ‘squeeze,’” Dusaniwsky said.

Benzinga’s Take

Tesla shares have been all over the map in 2019 as the company struggles to prove to its skeptics it can be consistently profitable. Despite the volatility, Tesla shares are now up 22% overall in 2019.

Tesla's stock traded around $406 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

Related Links:

Tesla's Stock Crosses $400 Per Share For The First Time Ever

Why Tesla Shorts Can't Stop, Won't Stop

Posted In: Ihor DusaniwskyS3 PartnersAnalyst ColorTop StoriesAnalyst RatingsTrading Ideas

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.