Tesla: most shorted stock ever?
17 August 2018 New York
Image: Shutterstock
Elon Musk recently claimed that Tesla is “the most shorted stock in the history of the stock market” but IHS Markit analyst, Sam Pierson, said that this is not entirely true.
On 7 August, peak short balance for Tesla reached just over $13 billion and on that same day Musk made the claim that Tesla is the most shorted stock in the history of the stock market. Pierson said that he cited this as part of the motivation to go private.
Musk stated that: “Being public means that there are large numbers of people who have the incentive to attack the company.”
Pierson says that while Elon is certainly correct that there is a significant bet against the firm, and those short bettors have been far from quiet, the claim of “most shorted stock ever” is worthy of further scrutiny.
Pierson commented: “Since then [7 August] the declining share price and a 2 million share reduction in shorts have taken the position down to $11.4 billion on 32.8 million shares.”
“That is certainly an extreme reading in dollar terms, as the next largest US equity short position is $AMZN at $8.8 billion, which is less than 1 percent of the firm’s market cap.”
He continued: “Of the 48 US equities with over $2 billion short, MCHP, AMD, OMC & KSS are the only stocks where the short position is greater than 10 percent of market cap.”
“Looking back to the start of 2008, we could only find four examples of US equities which had more than $13 billion short, all of which were related to short term corporate action events.”
“Tesla is easily the most shorted US equity in dollar terms currently, but it is not, in the most literal sense, the most shorted stock in the history of the stock market”, Pierson highlighted.
However, the duration of the these positions was in each case less than a month and centered around a specific arbitrage opportunity, Pierson found.
He added: “So while Tesla isn’t the most shorted ever, it is being denied that dubious title more by technicality than by another firm having a greater negative sentiment expressed via short positions.”
According to Pierson, at present, the most shorted stock globally is Alibaba, whose over $25 billion short balance dwarfs that of Tesla; however, a portion of that short is hedging an arbitrage relating to the legacy Yahoo business, now renamed Altaba.”
Shifting to another popular measure of short interest, Pierson noted that there are 26 US stocks which have had a greater percent float short in 2018 than Tesla’s peak of 33 percent (observed in May), filtering to only look at stocks with $500 million plus short positions.
Pierson said: “There are currently 42 US equities with > 33 percent float short overall. As a ratio to its own float, shares outstanding or market capitalization Tesla is not the most shorted US equity.”
He concluded: “Taken together, the claim of ‘most shorted stock in the history of the stock market’ isn’t literally true in dollar terms, though it’s fair in the sense that there has not been another US equity short position greater than $10 billion which lasted for more than a quarter.”
“As Tesla and Elon Musk steadfastly remain in news headlines, IHS Markit will continue to keep a close eye on short sellers.”
On 7 August, peak short balance for Tesla reached just over $13 billion and on that same day Musk made the claim that Tesla is the most shorted stock in the history of the stock market. Pierson said that he cited this as part of the motivation to go private.
Musk stated that: “Being public means that there are large numbers of people who have the incentive to attack the company.”
Pierson says that while Elon is certainly correct that there is a significant bet against the firm, and those short bettors have been far from quiet, the claim of “most shorted stock ever” is worthy of further scrutiny.
Pierson commented: “Since then [7 August] the declining share price and a 2 million share reduction in shorts have taken the position down to $11.4 billion on 32.8 million shares.”
“That is certainly an extreme reading in dollar terms, as the next largest US equity short position is $AMZN at $8.8 billion, which is less than 1 percent of the firm’s market cap.”
He continued: “Of the 48 US equities with over $2 billion short, MCHP, AMD, OMC & KSS are the only stocks where the short position is greater than 10 percent of market cap.”
“Looking back to the start of 2008, we could only find four examples of US equities which had more than $13 billion short, all of which were related to short term corporate action events.”
“Tesla is easily the most shorted US equity in dollar terms currently, but it is not, in the most literal sense, the most shorted stock in the history of the stock market”, Pierson highlighted.
However, the duration of the these positions was in each case less than a month and centered around a specific arbitrage opportunity, Pierson found.
He added: “So while Tesla isn’t the most shorted ever, it is being denied that dubious title more by technicality than by another firm having a greater negative sentiment expressed via short positions.”
According to Pierson, at present, the most shorted stock globally is Alibaba, whose over $25 billion short balance dwarfs that of Tesla; however, a portion of that short is hedging an arbitrage relating to the legacy Yahoo business, now renamed Altaba.”
Shifting to another popular measure of short interest, Pierson noted that there are 26 US stocks which have had a greater percent float short in 2018 than Tesla’s peak of 33 percent (observed in May), filtering to only look at stocks with $500 million plus short positions.
Pierson said: “There are currently 42 US equities with > 33 percent float short overall. As a ratio to its own float, shares outstanding or market capitalization Tesla is not the most shorted US equity.”
He concluded: “Taken together, the claim of ‘most shorted stock in the history of the stock market’ isn’t literally true in dollar terms, though it’s fair in the sense that there has not been another US equity short position greater than $10 billion which lasted for more than a quarter.”
“As Tesla and Elon Musk steadfastly remain in news headlines, IHS Markit will continue to keep a close eye on short sellers.”
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