Short interest in Telsa is at its lowest level since at least 2015 after a major share price rally sent hedge funds scurrying to cover their positions in the face of up to $6.43 billion of mark-to-market losses as of mid-July.
Tesla’s share price has increased steadily since roughly October 2019 and then spiked further in Q2 to now top $1,600 as of 20 July.
Ihor Dusaniwsky, managing director at S3 Partners, notes that shorts are down $20.41 billion in net-of-financing mark-to-market losses in 2020, including down $38 million on 15 July’s 1.93 percent positive share price move.
After being down $3.68 billion of mark-to-market losses in June, Tesla shorts are already down $6.43 billion of mark-to-market losses as of 15 July.
As a result, Tesla shorts are being squeezed out of their positions due to large mark-to-market losses.
Data from S3 Partners shows that Tesla short interest was $19.79 billion representing 13.05 million shares short and 8.86 percent of its float with a 0.3 percent stock borrow fee as of 15 July.
By the same period, the number of shares shorted had decreased by 2.09 million shares (-$3.17 billion in market value) over the past month, a decrease of 13.80 percent as its stock price rose by 62.18 percent.
In the week prior to 15 July, the number of shares shorted decreased by 1.30 million (-$1.98 billion in market value ), a decrease of 9.09 percent as its stock price rose 9.13 percent over the same period.
Borrow fees for Telsa have been in the general collateral range since October 2019, S3 data shows.
In the past, the perennial short target has often courted demand to borrow that does not closely track its share price. This is in part due to a series of controversies and conspiracies peddled in social media forums surrounding Tesla’s enigmatic chief Elon Musk.
This time, however, short sellers have fled in the wake of Tesla’s meteoric rise saw its share price increase from around $200 to just over $1,600 this week.
The rocketing share price is the result of a series of announcements for new Tesla Gigafactories around the world, technology upgrades and new partnerships with firms and endorsements of the electric vehicles in the US and elsewhere.
Moreover, Tesla’s next earnings call, scheduled for 22 July, may cause short sellers to retreat further and is expected to be Musk’s next victory lap and may even secure his firm a place in the S&P 500.
“Tesla is the largest domestic equity short I’ve ever seen … and the first US equity short with over $20 billion of short interest,” says Dusaniwsky, who notes that only Apple has ever come close to garnering the same levels of short interest with $16.97 billion seen on 19 November 2019.
There are the three big hedging exchange-traded funds (ETF), SPY, IWM and QQQ, which are in this stratosphere but there is no other equity that has been close to TSLA, he adds.
Current ETF short interests is SPY $60.9 billion, IWM $18.2 billion and QQQ $16.6 billion, making Tesla the second-largest equity/ETF/American depositary receipt in the US market.
Apple and Amazon place second and third respectively for the most equity short interest in the domestic US market by trail far behind Tesla.
Image: Tesla 