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Short Sellers Suffer Significant Losses as Tesla's Stock Surges for 11 Consecutive Sessions

12 June 2023
2 min.
Short Sellers Suffer Significant Losses as Tesla's Stock Surges for 11 Consecutive Sessions

Tesla's Stock Skyrockets

Tesla, Inc. (NASDAQ:TSLA), a leading electric vehicle manufacturer known for its innovative technology and sustainable vision, has witnessed a remarkable surge in its stock performance this year. With nearly doubled value, Tesla's shares have garnered significant attention and impacted both investors and short sellers.

Positive Start and Mid-February Rally

After commencing the year on a positive note, Tesla's stock demonstrated strong upward momentum, rallying through mid-February. Investors were buoyed by the company's solid performance during this period.

Momentary Faltering and May's Resurgence

Despite the initial rally, Tesla's upward trajectory experienced a temporary setback. However, in May, the company regained its strength, delighting investors with a renewed surge in stock value.

Short Sellers' Significant Losses

Tesla's recent 11-day winning streak proved detrimental for short sellers, leading to substantial losses. Data from S3 Partners revealed that these investors incurred approximately $6.08 billion in mark-to-market losses. Remarkably, Tesla holds the distinction of being the largest short bet globally, according to S3 Partners' Ihor Dusaniwsky.

Short Interest and Mark-to-Market Losses

As of May 24, the start of the winning streak, Tesla's short interest amounted to $22.43 billion, with 95.51 million shares shorted, representing 3.52% of the float. This cumulative short interest contributed to mark-to-market losses totaling $11.68 billion in 2023, as reported by the analyst.

Anticipated Upside and Impact on Short Sellers

Analysts foresee further potential growth for Tesla shares in the near term. They expect upward revisions to price targets, driven by estimates preceding the June quarter results. Significantly, the stock currently trades above the price targets set by most sell-side firms, indicating the possibility of additional losses for short sellers. This situation presents an opportunity for further upside in Tesla's stock.

Short Squeeze and Increased Demand

A short squeeze resulting from short covering may fuel Tesla's stock even higher. Short covering involves buying back borrowed securities to close out open short positions, thereby creating additional demand for the stock.

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