Tesla’s Rally Creates $1 Billion Headache for Its Army of Shorts

(Bloomberg) — The 10% surge in Tesla Inc. shares Thursday after the electric-vehicle maker reported strong earnings is creating one notable group of losers: The pile of traders betting against the stock.

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Tesla is the most shorted stock in the world, with almost 3% of its float held in short-selling positions. S3 Partners estimates that these investors are taking in more than $1 billion in mark-to-market losses just on Thursday’s surge. That drives their losses this month to $2.67 billion, according to S3.

“Tesla short sellers were actively trimming their exposure ahead of the earnings release, covering 2.09 million shares, worth $1.55 billion, over the last 30 days,” S3’s managing director of predictive analytics Ihor Dusaniwsky wrote in a note. Short sellers could continue to get squeezed out of their positions due to such “large and sudden losses,” he wrote.

Shares of the Elon Musk-led company wrapped up a seven-day winning streak to close at $815.12 in New York, the highest level since May 6.

Of course, none of this diminishes the strong year Tesla shorts have enjoyed so far, racking up $6.34 billion in mark-to-market profits in 2022.

The reason is no surprise. Tesla is in the midst of a troubled year as the company battles supply-chain troubles and soaring raw-material costs. It was forced to tackle production disruptions in China due to Covid-related lockdowns. Then there’s Musk’s ill-fated pursuit of social-media company Twitter Inc., which weighed further on investor sentiment.

However, Tesla’s second-quarter results after the market closed on Wednesday helped allay many of those concerns. The company stood by its production outlook for the year and said demand was not a problem.

(Updates to close prices in)

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Source: https://finance.yahoo.com/news/tesla-rally-creates-1-billion-172246409.html