Tesla short selling update
09 August 2018 New York
Image: Shutterstock
Since the Saudi Arabia sovereign wealth fund took a $2 billion stake in Tesla shares, Sam Pierson of IHS revealed that in dollar terms, Tesla's equity short position was above $13 billion for the first time, the previous peak being $12.8 billion on 14 June.
The short interest equates to 20.7 percent of outstanding shares, down from the year-to-date (YTD) peak of 23 percent observed in June.
“The short interest in TSLA hasn’t changed a ton over the last week since they reported earnings.”
Pierson added: “We’ve seen a 700,000 reduction in shares short, leaving the total at just over 35 million shares, well above the 31.5 million shares observed the last time the share price was in the $370s in mid-June.”
The short value is higher than any Standard and Poor 500 stock, he added. Only Under Armor has a higher percentage of outstanding shares short with 24 percent.
Others in the top six sold short are Discovery Inc (19 percent), Mattel Inc (16 percent), Kohls Corp (16 percent), Advanced Micro Devices Inc (16 percent) and Hanesbrands Inc (15 percent).
Pierson stated: “There’s a lot of debt, around $9 billion, which short sellers are betting against via outright shorts in the underlying bonds and credit default swap contracts. The firm doesn’t need to go bankrupt in order for these trades to be profitable.”
“When Moody’s downgraded the firm’s credit rating in late March, the 2025 bonds traded down from 92.62 to 86.75 which was the YTD low. Yesterday the bonds traded up to 92.18.”
“Part of the reason investors are sceptical about Musk’s suggestion about taking the firm private is that at a yield in the 6 to 7 percent range it could be a challenge, for a firm which continues to report losses, to fund interest payments on an addition of many billions in debt.”
Pierson concluded: “There has been no reduction in short positions in the bonds, currently over $300 million short the bonds (at par), compared with $12 billion-plus in the equity.”
The short interest equates to 20.7 percent of outstanding shares, down from the year-to-date (YTD) peak of 23 percent observed in June.
“The short interest in TSLA hasn’t changed a ton over the last week since they reported earnings.”
Pierson added: “We’ve seen a 700,000 reduction in shares short, leaving the total at just over 35 million shares, well above the 31.5 million shares observed the last time the share price was in the $370s in mid-June.”
The short value is higher than any Standard and Poor 500 stock, he added. Only Under Armor has a higher percentage of outstanding shares short with 24 percent.
Others in the top six sold short are Discovery Inc (19 percent), Mattel Inc (16 percent), Kohls Corp (16 percent), Advanced Micro Devices Inc (16 percent) and Hanesbrands Inc (15 percent).
Pierson stated: “There’s a lot of debt, around $9 billion, which short sellers are betting against via outright shorts in the underlying bonds and credit default swap contracts. The firm doesn’t need to go bankrupt in order for these trades to be profitable.”
“When Moody’s downgraded the firm’s credit rating in late March, the 2025 bonds traded down from 92.62 to 86.75 which was the YTD low. Yesterday the bonds traded up to 92.18.”
“Part of the reason investors are sceptical about Musk’s suggestion about taking the firm private is that at a yield in the 6 to 7 percent range it could be a challenge, for a firm which continues to report losses, to fund interest payments on an addition of many billions in debt.”
Pierson concluded: “There has been no reduction in short positions in the bonds, currently over $300 million short the bonds (at par), compared with $12 billion-plus in the equity.”
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