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Nov 15, 2017

S3 Analytics: “Hurtful” Tesla Short Sellers up In 4th Quarter

Tesla Inc. (TSLA) short sellers have taken it on the chin for most of 2017, down $4.1 billion in mark-to-market losses for the first three quarters of 2017 on an average short position of $9.4 billion.  After hitting its year-to-date high of $385/share on September 18th,Tesla’s stock price has been on a 20% slide as Model 3 production proved to be more challenging than expected. Shorts have recouped $890 million of their losses so far in the 4th quarter as stalwart short sellers held onto their convictions and shares.

Tesla short interest hit a historical high on September 21st, with 31.3 million shares shorted with a market value of $11.5 billion. Since that high, some shorts have covered their positions with “only” 28 million shares shorted worth $8.6 billion.  While some shorts have been covering, several prominent short-sellers were adding to their positions, including Jim Chanos of Kynikos Associates who recently stated on CNBC that he has been increasing his Tesla short exposure throughout the year.

Even being down almost $3 billion from its historical high short interest, Tesla is till the largest equity short in the U.S. market, and the third largest worldwide short behind just Alibaba Group ADR (BABA) at $23.1 billion and Ping An Insurance (2318 HK) at $13.8 billion.

With the markets rallying again this year, the S&P 500 up 17.8% and the Nasdaq up 27.2%, short selling has been a difficult endeavor. Big short winners for the year include General Electric (GE) up $1.4 billion, CenturyLink (CTL) up 1.0 billion, Under Armour (UAA) up $731 million and Snap (SNAP) up $502 million. Non-Tech based companies were the big short winners in the fourth quarter as well, with AT&T (T) up $1.1 billion, Tesla (TSLA) up $890 million and Intuitive Surgical (ISRG) up $829 million.

Internet retailers and chip makers make up eight out of the top ten worst short performers in the fourth quarter as the tech sector continues to be a den of pain for short sellers. $27.0 billion of aggregate short interest in Amazon.Com (AMZN), Intel (INTC), Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), Netflix (NFLX), Square (SQ) and Micron Tech (MU) generated $4.2 billion of mark-to-market losses in the fourth quarter, a negative 15.4% run rate.

In a Rolling Stone Magazine interview, Elon Musk references S3’s data on Tesla’s short interest and mark-to-market losses and refers to Tesla short sellers as "They're jerks who want us to die, It’s really awful. It’s … Hurtful.” But Tesla shorts have been the ones who have been hurting for almost two years, maybe now the shoe is on the other foot.

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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