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According to S3 Partners analysis, short investors in Tesla – those who have bet in the market that its shares will lose value – have lost $ 35 billion on those positions so far this year.
“There is nothing like it that I can remember,” said Ihor Dusaniwsky, S3 general manager and short circuit expert.
Tesla’s short sellers lost $ 8.5 billion in November alone, as the company’s shares climbed 46% in the month. That’s more than the $ 6.7 billion Tesla himself lost in the 11 years since the results were first released in 2008 at the end of last year.
For anyone who believes the company is a paradigm-shifting clean energy leader with unlimited potential, there are other investors who believe it is an out-of-the-box niche player that will soon be overwhelmed by larger and more established automakers.
This is why there has been so much interest in Tesla shares for a long time, with these convicts currently owning around 6% of total shares. That’s much higher than the 1% or 2% short-term interest in most other large cap companies.
Why the losses are so important
When investors sell a stock short, they promise to sell the stock at a later date at a fixed price. If the stock price goes down, they make money by being able to buy stocks at a lower cost than they agreed to sell them. But if the share price goes up, they lose money. Potentially a lot of money.
Tesla’s meteoric rise in shares this year has caused pain, unlike anything seen in the market before, as many investors have taken a short position and the company’s shares have become so expensive.
Dusaniwsky said many shorts have closed their positions – the number of Tesla shares held by short sellers is down 63% so far this year. But he said many are still unwilling to change their minds despite the losses.
“You have shorts with a strong conviction that hold their trades,” he said.
The combination of Tesla as a very large cap stock with so much short interest staying in place despite huge losses is what makes this so unique, Dusaniwsky said.
“It’s really a unicorn short,” he says.
“I even said the stock was too high. I mean what am I supposed to do?” he rolled his eyes in an interview with Mathias Doepfner, CEO of tech and media company Axel Springer, on Tuesday.
Musk also warned his employees in an email this week that if they don’t work to control costs and investors start to doubt forecasts of big profits to come “our stock will immediately be smashed under a hammer. ! “
Premium shorts that stay put
One of the market’s main short investors, Jim Chanos, admitted he reduced his long-held short position in Tesla even as he continued to doubt the company’s long-term outlook.
And another major short seller, Michael Burry, who rose to fame as the focus of The Big Short book thanks to his bet against the housing bubble and mortgage-backed securities just before the Great Recession, revealed in a since deleted tweet that he also took a short position on Tesla.
“So Elon Musk, yeah, I’m running out of Tesla, but some free advice for a good guy… Seriously, issue 25-50% of your stock at the current ridiculous price. If there are buyers, sell that. #TeslaSouffle, “read the tweet.
But despite lingering doubts in some short films, Tesla wins over other skeptics.
Goldman Sachs revised its recommendation to buy stocks up from neutral on Wednesday and set a 12-month target price of $ 780, 31% above Thursday’s close.
Goldman predicted that despite Tesla’s small overall market share, it could become one of the world’s largest automakers, selling 15 million cars a year by 2040. By comparison, global leader Volkwagen has sold 11 million cars last year.
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