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Sep 29, 2017

S3 Analytics: Tesla is Most Profitable September Auto Sector Short

The Auto Manufacturer Sector has the 6th largest short interest worldwide, trailing the Internet Software & Services, Diversified Banks, Biotech, Pharma and Semiconductor sectors. With $33.6 billion of worldwide short exposure, and just $13.1 billion in the U.S., short sellers have spread their short risk across the globe.

The top 20 shorts make up 92%, or $31.1 billion, of the overall short interest in the sector with Tesla Inc. (TSLA) the largest worldwide auto manufacturing short at $9.6 billion. Short interest in the sector is up $12.1 billion for the year, with Tesla making up $2.3 billion, or nearly one fifth, of the increase. Tesla short interest is actually down $1.8 billion from its recent high of $11.4 billion in mid-September as short sellers have covered some of their exposure as the stock retreated $40/share from its recent highs. Notable increases in short interest over the last month are Byd Co Ltd (1211 HK), up $547 million to $1.2 billion, and BMW AG (BMW GR) up $206 million to $758 million.

Although short interest in the sector has increased dramatically, short sellers have not fared well. The top twenty shorts are down $6.5 billion in mark-to-market losses in 2017 with $4.1 billion, or nearly two-thirds, of those losses belonging to Tesla short sellers.

Over the last month fortunes have reversed, with Tesla shorts up $160 million and the rest of the top-twenty down $1.5 billion. In the U.S. General Motors (GM) shorts are down $199 million and Ford Motor (F) shorts are down $141 million. In Japan, Toyota Motor (7203 JP) shorts are down $182 million and Honda Motor (7267 JP) shorts are down $61 million. In Hong Kong, Byd Co Ltd (1211 HK) shorts are down $381 million and Geely Auto (175 HK) shorts are down $71 million. And in Europe, Volkswagen (VOW3 GR) shorts are down $97 million and Peugeot (UG FP) shorts are down $81 million.

Strong August auto sales and the certainty of some type of mandated government backed shift to electric cars in the near future created an auto rally which started on September 11th and continued for the rest of the month. Tesla short sellers were one of the few profitable shorts over the last two weeks and were up $72 million in mark-to-market profits as the stock fell 5.5%. Tesla, Nissan Motor (7201 JP), Great Wall Motor (2333 HK) and Ferrari NV (RACE) were the only four profitable shorts in the top twenty most shorted worldwide auto stocks over the last month.

Tesla shorts have proven that they have an iron will and are standing by their short thesis by increasing their overall short exposure in 2017 even after being down over $4 billion in year-to-date mark-to-market losses. Now we will see if short sellers in Byd and Geely will continue to hold onto their positions as both are down over half a billion $USD in year-to-date losses, as well as Toyota and GM shorts who are heading towards $200 million of year-to-date losses.
Want deeper insight into the above analysis? Contact:
Managing Director Predictive Analytics, S3 Partners, LLC
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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