Markets

Short sellers betting against Tesla lose more than $1 billion in single day as stock surges

Key Points
  • Investors betting against Tesla collectively lose more than $1 billion on Thursday as the company's stock headed for its best day since 2013.
  • "Short sellers are, as Elon Musk stated earlier in the year, 'feeling the burn,'" writes Ihor Dusaniwsky, managing director at S3.
  • Some high-profile short sellers such as Greenlight founder David Einhorn and Jim Chanos have clashed with Tesla and CEO Musk in the last few years.
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Investors betting against Elon Musk's electric-auto maker Tesla collectively lost an estimated $1 billion-plus on Thursday as the company's stock headed for its best day on Wall Street since 2013.

Tesla popped 16.5% Thursday to around $300 per share, meaning short sellers betting against the stock are on track for $1.4 billion in mark-to-market losses on the day — wiping out almost 70% of short sellers' year-to-date profits, estimates S3 Analytics.

"Short sellers are, as Elon Musk stated earlier in the year, 'feeling the burn,'" wrote Ihor Dusaniwsky, managing director at S3. "Prior to today's price move TSLA short sellers were up +$2.00 billion in mark-to-market profits, this is down from its year-to-date P/L high of +$5.16 billion of mark-to-market profits before TSLA began its sustained rally in June."

To be sure, those who bet against Tesla at the start of 2019 are still in the black to date with the equity down more than 11% this year after Thursday's price moves. Tesla stock closed at $254.68 on Wednesday, which at the time represented a 23.4% slide for 2019.

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Tesla is the most heavily shorted stock in the U.S., as well as the most heavily shorted automaker in the world. Short interest, or the number of shares borrowed in hopes of buying them back at a profit after the stock drops, totals $9.03 billion for Tesla, according to S3.

Some high-profile short sellers such as Greenlight founder David Einhorn and Jim Chanos have clashed with Tesla and Musk in the last few years.

Musk himself has over the years taken to Twitter to do battle against such doubters, fighting back against investors betting against his stock and other detractors, often with controversial comments.

In May 2018, Musk tweeted that shorts were about to feel the "burn of the century." Over a year late, but maybe it's just starting to play out for the Tesla chief.