Both Tesla Inc (TSLA) and NIO Inc (NIO) had reports of vehicles fires in Shanghai and Xiâ€™an China which is highlighting safety fears over electric vehicles and the use of high density lithium batteries. TSLA is down -3.6% over the past two days while NIO is up slightly, +0.84%.
TSLA is the largest short in the worldwide Auto Manufacturing Sector while NIO is the 15th largest short in the sector. Both have been profitable shorts with Tesla short sellers up $1.91 billion, +22.80%, in mark-to-market profits including $334 million in profits on the two dayâ€™s 3.64% decline in share price. NIO short sellers have not been quite as profitable, up only $129 million in mark-to-market profits, +31.78%, including down $3 million yesterday and today.
With both short trades being so attractive, short sellers have been adding to their positions in 2019. TSLA shares shorted are 34.05 million shares, an increase of 8.48 million shares, +33.16%, for the year with an increase in April of 1.31 million shares, +4.00%. NIO short sellers have been much more active. NIO shares shorted are 92.72 million shares, an increase of 49.20 million shares in 2019, an increase of 113% for the year. NIO shorts were also active in April, an increase of 8.22 million shares, or +9.73%.
The majority of short selling for both TSLA and NIO occurred in February and March, with an appreciable flattening in shares shorted growth in April as short sellers hit their short exposure targets or trading limits in both names. We are seeing moderate short selling in both EV car stocks today as short sellers continue to build their positions slowly on any additional negative news.
TSLA reports its earnings on Wednesday, we should see short sellers topping off their bets tomorrow if they feel TSLA will report a quarterly loss following a delivery shortfall in its first quarter. NIO reported its last earnings release on March 5th which precipitated a severe decline in its stock price over the next week which has continued into the 2nd quarter. Both stocks continue to be short targets, and as long as their stock prices continue to decline and the trades remains profitable there are no short squeezes on the horizon, and even more short sellers may enter the trades if they start sensing blood in the water.
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Managing Director Predictive Analytics, S3 Partners, LLC
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