Market Overview

Tesla Short Sellers Have Taken A $4B Hit This Week

Tesla Short Sellers Have Taken A $4B Hit This Week

A huge 2020 got even better this week for Tesla Inc (NASDAQ: TSLA) investors after Tesla was confirmed it will be added to the S&P 500 index. Tesla shares hit new all-time highs of $508.61 this week following the S&P 500 news in one of the worst weeks of the year for Tesla short sellers.

Prior to Friday’s 1.9% drop, Tesla short sellers had already taken a $4 billion loss so far this week, according to S3 Partners analyst Ihor Dusaniwsky.

On Thursday, Dusaniwsky said Tesla remains the most heavily shorted stock in the world with more than $22 billion in short interest. That amount of short interest is more than $10 billion more than the second most shorted stock, Alibaba Group Holding Ltd - ADR (NYSE: BABA). Alibaba has only $12 billion in short interest.

Related Link: Josh Brown Loves GM Right Now: 'They're Going From A Combustion Engine Giant To An Electric Giant'

Horrendous Week For Shorts: Based on S3’s numbers, Tesla short sellers added more than $4 billion to their 2020 losses this week.

Following this week’s gains, Tesla shares are up more than 487% year to date, and short sellers have been taking a pounding all year. As of the close on Thursday, Tesla short sellers have endured $30.3 billion in mark-to-market losses in 2020, according to S3.

The huge losses are forcing some Tesla short sellers to exit their positions. S3 reported that Tesla’s short interest has dropped by $3.3 billion over the past 30 days. Dusaniwsky said he expects that trend to continue into year’s end.

“The exit of older TSLA shorts not being replaced by new TSLA shorts may produce a dramatic drop in total TSLA shares shorted in the month of December,” Dusaniwsky said.

Benzinga’s Take: Tesla’s market cap has grown to be nearly the size of the entire legacy auto market despite the fact that Tesla represents only a small fraction of global auto sales, so it’s understandable why short sellers are frustrated.

On Friday’s Benzinga PreMarket Prep, Ritholtz Wealth Management CEO Josh Brown said traders should anticipate the valuation gap between Tesla and legacy automaker General Motors Company (NYSE: GM) to eventually narrow at some point.

Latest Ratings for TSLA

Nov 2020WedbushMaintainsNeutral
Nov 2020Morgan StanleyUpgradesEqual-WeightOverweight
Nov 2020B of A SecuritiesMaintainsNeutral

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