Nikola Short Sellers Pocket $51M On Hindenburg Sell-Off

Nikola Corporation NKLA shares dropped 9.5% on Thursday following a report from short seller Hindenburg Research alleging the company is an “intricate fraud.”

Nikola short sellers initially took a massive hit earlier this week when Nikola announced a new partnership with General Motors Company GM, but short sellers are now back in the black for the month of September following the Hindenburg report.

Nikola shares climbed as much as 41% Tuesday when the company announced GM would be taking an $11-billion stake in the company in exchange for producing Nikola’s Badger electric trucks. Yet short sellers appear to have dodged a bullet for now after Thursday’s Hindenburg report sent Nikola’s stock crashing back down to earth.

Nikola currently has $532 million in short interest, according to S3 Partners analyst Ihor Dusaniwsky.

That short interest represents about 12.55 million shares, or 9.2% of its float.

Nikola Short Selling Accelerates: Dusaniwsky said Thursday that Nikola’s short interest is up by 337,000 shares in the last month, but short selling has accelerated in the last week.

In the last week alone, Nikola’s short interest increased by 874,000 shares, or about 7.5%, ahead of the Hindenburg report.

Nikola shares initially skyrocketed after the stock first began trading back in early June, but they have since cooled down and are now up just 8.2% overall from their initial trading price.

Year-to-date, Nikola short sellers are down $253 million in net-of-financing mark-to-market losses, but Dusaniwsky said Thursday’s Hindenburg sell-off generated $51 million in profits for Nikola short sellers. It also put them back in the black for the month of September at a $36 million overall profit.

Dusaniwsky said traders should expect more pressure in Nikola shares in the coming days.

“With some long shareholders looking to sell and lock in whatever is left of their profits since NKLA’s June $79.73 year-to-date high we may see down-side price pressure from both the short and long side of the market,” he wrote.

NKLA Price Action: Nikola shares were trading down 11.7% at $33.17 at last check Friday. 

Benzinga’s Take: Nikola’s short position is a relatively large percentage of the stock’s float, but Nikola is only the 11th largest short in the auto industry.

Tesla Inc TSLA is by far the most popular auto stock among short sellers, with $21.7 billion in total short interest.

Related Links:

Analyst: S&P Passed On Tesla Because It's 'Profoundly Overvalued'

Short Seller Compares Nikola To Theranos: 'Intricate Fraud Built On Dozens Of Lies'

Photo courtesy of Nikola. 

Posted In: electric vehiclesEVsHindenburg ResearchIhor DusaniwskyS3 PartnersAnalyst ColorShort IdeasAnalyst RatingsMoversTrading Ideas