Tesla makes short work of sceptics

Hedge funds that shorted Tesla are sitting on losses of $840m after its shares touched highest level in more than a year.

Tesla CEO Elon Musk. Picture: AFP

Hedge funds that shorted Tesla are sitting on losses of $US575 million ($840m) after shares in the electric carmaker touched their highest level in more than a year.

Upbeat commentary from one of Wall Street’s biggest sceptics on Tesla’s future sent shares in the Californian company soaring at the start of the week. Dan Levy, an analyst at Credit Suisse, said the company is “leading in the areas that will likely define the future of carmaking - software and electrification”.

Another Wall Street analyst, Colin Rusch at Oppenheimer, said that expectations for Tesla’s new factory in Shanghai were increasing, citing photos of cars that have begun to “filter out through multiple media outlets”.

Shares in Tesla rose by as much as 7 per cent on Monday, touching the highest intraday level since August 2018 and closing at $US381.50. They are up 14 per cent this year. Those betting against Tesla have lost about $US1.85 billion this year, according to S3 Partners, the financial analytics firm. Tesla is the third-most targeted stock in the US and the most shorted carmaker in the world.

Short interest in the group totals $US9.16 billion, according to S3 Partners. About 25.55 million shares, or 19.1 per cent of the float, are being shorted, down from a high of 37.3 per cent in late May.

Short-selling is when traders pay a fee to borrow a stock from a large institution and sell it in the hope the share price will fall, allowing them to buy it back at a lower price.

Concerns about Tesla’s path to a sustainable profit and the ambitious production targets of Elon Musk, its chief executive, has led to many traders betting against the group until recently.

Tesla shares were down to $US378 in early trading Tuesday, following news that the Trump administration had ignored pleas to extend a tax credit for electric vehicle buyers.

The Times