Short Sellers Down Billions
Tesla Inc.’s stock surge this year has dealt a significant blow to short sellers, causing them to incur billions of dollars in losses. The stock’s 13-day winning streak came to an end on Wednesday, but it has more than doubled in value since the beginning of the year, creating a headache for those who were betting on its decline.
Short selling of Tesla shares has been on the rise throughout 2023, but recent market activity has triggered a wave of short covering, exacerbating losses for Tesla short sellers. Real-time data from financial analytics firm S3 Partners reveals that Tesla shorts suffered mark-to-market losses of approximately $816 million due to the stock’s 3.5% jump on Tuesday.
Year-to-date mark-to-market losses for Tesla shorts stand at a staggering $12 billion, marking an 80% decline. In June alone, they have lost $5 billion, representing a 24% decrease. It is a stark contrast to 2022 when Tesla shorts enjoyed mark-to-market profits of almost $16 billion.
Following a challenging April that saw a 20% decline, Tesla stock gained significant momentum in May and has continued to climb in June, posting gains of around 60% for the month. Year-to-date, the stock has surged by 110%, greatly outperforming the broader market, with the S&P 500 index advancing by approximately 14% during the same period.
Tesla’s recent stock gains were partly driven by the adoption of its fast-charging standard as the de facto standard in the United States. Last week, Tesla announced an agreement with General Motors and Ford Motor Co., granting their electric vehicle owners access to Tesla’s Supercharger network, which is typically located near major highways. General Motors also committed to conforming to Tesla’s North America Charging Standard by 2025.
The move by major automakers to align with Tesla’s charging standards has put a spotlight on the issue and contributed to Tesla’s stock performance. Tesla CEO Elon Musk had previously expressed intentions to open the Supercharger network to other EVs, a promise that is now being fulfilled.
Tesla’s decision to create its own charging connector came about when it was the sole manufacturer of long-range EVs, and there were no established standards at the time. However, other automakers are now adopting the North America Charging Standard, which Tesla has made open source, leading to increased compatibility across the market.
As Tesla’s stock continues its upward trajectory, short sellers face increasing pressure to cover their positions. The company’s impressive performance and its expanding influence in the EV charging infrastructure sector are likely to contribute to further market dynamics in the coming months.
