Tesla Inc.’s (TSLA) short interest is $10.53 billion and the stock continues to be the largest equity short in the U.S. market. There are 35.33 million shares of Tesla shorted, or 27.88% of its float. Stock borrow rates have eased slightly to 2.41% fee; down from the 3.50% fee level we saw in June. There was a modicum of net short selling in July with an increase of 739k shares, up +2%, but virtually no change over the last week, with shares shorted up only 108k shares. Short sellers continue to have conviction in Tesla underperforming over the longer term, but we have not seen a rush to short more shares in anticipation of weak results reported after the close.
Tesla short sellers are still in the red even after a strong July. Tesla’s stock price is down -0.50% today, generating +$52 million in mark-to-market profits. This follows a very strong July when Tesla’s stock price fell -13% and short sellers made +$1.53 billion in mark-to-market profits. Short sellers’ year-to-date mark-to-market loss on their Tesla short exposure is now down to -$118.6 million, or -1.11%.
Today’s earnings call will either embolden short sellers and spur them on to increase their short exposure to the $11 - $12 billion levels we saw mid-year or trigger a Tesla rally which may squeeze out the less tenacious shorts and provide a buy-to-cover kicker to the rally. With shorts not increasing or decreasing their positions prior to the call there is does not seem to conviction in either direction which is confirmed by the large amount of out of the money call and put option buying, possibly putting on straddle or strangle trades. Option investors might not be sure which way Tesla’s stock price will go, but they are pretty sure it will be a volatile move.
Want deeper insight into the above analysis?
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.