Tesla Inc (TSLA) is truly a tale of two securities, while the stock is up a respectable +21% for the year, it is up a blistering +126% since itâ€™s low of $178.97 on June 3rd.
Tesla short sellers were in the â€śbest of timesâ€ť and up +$5.16 billion in net-of-financing mark-to-market profits as Tesla lost -46% of its value from January 1st to June 3rd 2019, nearly offsetting the -$5.75 billion of mark-to-market losses they incurred from 2016-2018.
But since June 3rd, Tesla shorts were facing the â€śworst of timesâ€ť and are down -$7.60 billion in mark-to-market losses. Tesla shorts are now â€śin the winter of despairâ€ť and down -$2.43 billion in mark-to-market losses for year-to-date 2019. Tesla shorts are down -$1.16 billion in mark-to-market losses this week alone.
But even though Tesla shares shorted have decreased by -18.2 million shares in 2019, -42%, and down -3.2 million shares in December this has not been a short squeeze in the truest sense.
While we have seen a large amount of short covering in the second half of 2019, actual $ short interest or dollars at risk has increased by +$2.47 billion since June 3rd. Short interest has ranged between $8.4 billion and $10.8 billion as Teslaâ€™s shares shorted has decreased while its stock price has rallied over the last seven months.
Mounting mark-to-market losses have squeezed out many shorts with less conviction or tighter risk thresholds, but a significant amount of shorts have held their ground and taken their 2019 rollercoaster P\L ride in stride. Overall, shares shorted are down -114 thousand shares, a decrease of only -0.45%, in 2019.
If Teslaâ€™s rally continues, we should see continued short covering as more shorts reach their P\L pain and risk limits. Total shares shorted is 25.46 million, just 1.23 million shares above the three year low of 24.23 million shares shorted we saw on January 30th of this year, while its $ short interest of $10.29 billion is exactly at 2018â€™s average $ short interest.
Tesla shares shorted have not dipped below 20 million shares since mid-2013, but as its stock price keeps hitting historical highs we can expect short covering to accelerate as short mark-to-market losses mount. If the pace pf short covering and price appreciation continues at this pace, we should see shares shorted below 20 million shares as Teslaâ€™s stock price hits $450/share and another $1 billion of mark-to-market losses hits the short sellerâ€™s ledgers.
What was a seven month long â€śhugâ€ť is turning into a full-blown â€śsqueezeâ€ť.
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Managing Director Predictive Analytics, S3 Partners, LLC
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