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Tesla Short Sellers Take $1.7B Hit

Musk

Tesla is the most shorted stock among U.S. companies, and CEO Elon Musk is notoriously caustic in his Twitter comments about “Shortville.” This week, after the release of Tesla’s second-quarter results, the residents of Shortville were in for an unpleasant surprise as their paper losses hit US$1.7 billion on an unexpected surge in the company’s stock price.

Despite posting yet another loss for the quarter, Tesla also reported an improvement in revenues and cash flow, as well as the fact that the Model 3 has started to make money during the quarter. Apparently, this was enough for investors to flock back into the company to the chagrin of short sellers.

Tesla expects to turn cash-positive this quarter as it maintains a production rate of 5,000 Model 3s weekly. What’s more, Musk told investors that the company will actually report profits for both the third and the fourth quarter of 2018 and reiterated that there was no need to raise more funds, again contrary to analyst forecasts that Tesla needs an urgent equity injection.

Earlier this year, despite growing investor unease about Tesla’s failure to ramp up its flagship Model 3’s production rate, the supply of stock available for shorting began dwindling. Now, says financial analytics provider S3, Tesla short sellers have swung into the red.

Before the release of the company’s better than expected Q2 figures, the year-to-date aggregate performance of Tesla short sellers was a positive US$276 million amid the Model 3 uncertainty and several accidents involving Tesla cars. After the release of the results, short sellers swung into a US$1.4-billion loss for the 12-month period.

Tesla has become the fourth worst-performing shorted stock, according to S3 data, as cited by Reuters. Since the start of 2016, Tesla short sellers have lost US$4.7 billion on their bets.

By Irina Slav for Oilprice.com

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