Tesla Incâ€™s (TSLA) stock price had been dropping and its shares shorted were increasing for most of the first half of 2019. TSLA short sellers were up +$5.16 billion in mark-to-market net-of financing profits as of June 3rd when TSLA hit its year-to-date low of $178.97/share. In just over six months, TSLA shorts were $128 million shy of recouping their 2016-2018 mark-to-market losses of -$5.29 billion.
TSLA hits its 2019 high shares shorted of 44.69 million shares on May 30th, a few days before it hit its year-to-date price low on June 3rd. Since May 30th TSLA short sellers have been steadily covering their exposure and in just under five months shares shorted have decreased by -11.59 million shares, -26%.
With this $2.94 billion worth of short covering hitting the tape, TSLA has relinquished its top spot in the â€śMost Shorted Domestic Stockâ€ť league table to Apple Inc (AAPL). As of September 20th, APPL has taken over the top spot and not looked back with +877 thousand of new AAPL shares shorted versus -4.88 million TSLA short shares covered.
TSLA is now the second largest short in the domestic market, but a distant $2.07 billion behind AAPL.
Since its year-to-date low of $178.97/share on June 3rd, TSLAâ€™s stock price has risen +42% and TSLA shorts are down -$3.12 billion in mark-to-market losses. But even with these large losses, TSLA shorts is still the most profitable short trade in the domestic market.
TSLA long shareholders continue to look for the â€śthe big short squeezeâ€ť, but TSLAâ€™s 2nd/3rd quarter rally and short covering was more like a â€ślingering hugâ€ť rather than an all out â€śshort squeezeâ€ť. Although the size of the price move and number of shares shorted qualifies for a moderate short squeeze, its gradual rate of change and extended duration did not match the abruptness of a classic short squeeze.
TSLAâ€™s +5% October price move and nearly three million of short shares covered looks like more recent short sellers are closing up their positions to realize what is left of their 2019 profits. While longer term TSLA shorts may not be feeling the squeeze, shorter term shorts certainly are feeling the squeeze and buying to cover. TSLA shorts may, in reality, be truly bifurcated: the older shorts with much more conviction and staying power and the newer shorts who are more momentum based and trying to hide a glass chin. While the first group is relatively short squeeze impervious, the second group is much more susceptible to stock price based buying and selling.
If TSLAâ€™s stock price continues to climb we should expect continued short covering giving the stock a muted short squeeze tailwind. If TSLAâ€™s stock price surgeâ€™s back into the $300â€™s we should see shares shorted fall below the 30 million share level.
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Â Â Â Â Â Â Â Â Managing Director Predictive Analytics, S3 Partners, LLC
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