July 19, 2019

Investors Betting Against Tesla Made $1 Billion on Friday

Investors Betting Against Tesla Made $1 Billion on Friday

It has made for a bumpy ride for Tesla investors — on either side of the trade.

Through it all, Mr. Musk’s public attacks on shorts have only intensified.

In May, he took to Twitter and warned of the “short burn of the century comin soon.” A month later, he predicted that those wagering on the stock’s decline “had three weeks before their short position explodes.” He even taunted David Einhorn, whose Greenlight Capital hedge fund has performed poorly this year in part because of its short bet on Tesla.

Mr. Musk has pointed to short-sellers as a reason he is considering taking Tesla private. In a message to employees explaining his thinking, he wrote: “As the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”

He isn’t exactly right on his history of short-sellers. At various points in the past 10 years, the value of bets against Procter & Gamble, General Electric, Pfizer and Johnson & Johnson exceeded Tesla’s high of roughly $13 billion, according to IHS Markit.

The value of short bets against Alibaba currently stands at $25 billion.

Even by the percentage of shares being shorted, it is not the highest. It’s not even the biggest of 2018. So far this year, 26 companies have had a higher percentage of their stock shorted than Tesla did at its peak of 33 percent in May.

But he does have a point about the persistence of short-sellers trying to profit on Tesla’s troubles. The short position in Tesla’s shares has remained above $10 billion for nearly five months. In the past decade, short-sellers have not held a position valued at more than $10 billion in any other American company for more than three months, according to IHS Markit.

Betting against Tesla has been expensive. Since 2016, short-sellers collectively have lost $5 billion, as the company’s shares rose 27 percent.

Even this year, amid all of Tesla’s woes, betting on a decline in the company’s share price has not been a winner. Its short-sellers remain down $650 million this year.

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