Tesla Shares TSLA Skyrocketing With Eye S&P500 Inclusion, Bears Amass $20B Shorts

Tesla Shares TSLA Skyrocketing With Eye S&P500 Inclusion, Bears Amass $20B Shorts

Featured image: @MountainPassEV / Twitter

The price of Tesla shares (TSLA) continues to rise and on Monday reached a new record high, raising the automaker's value by more than $325 billion, as investors see the stock is going to be included in the S & P 500.

Source: Top 25 Automakers

Tesla will be eligible for inclusion in the benchmark after posting four consecutive quarters of profitability. Many investors expect this when the second-quarter earnings will be published after the market closes on July 22.

Tesla made a lot of efforts in order to achieve profitability in 2Q. According to the company's report, Tesla delivered 90,650 units, which surpassed Street's forecasts even amid a six-week shutdown of Freemont's California manufacturing facility.

While the global automotive market was slowed by the coronavirus crisis, Tesla continued to distribute its cars into the mass market. Unlike competitors, which in their sales are completely dependent on car dealerships, Tesla relies on online sales and, thanks to numerous pre-orders, can hardly cope with production and delivery (due to a six-week factory shutdown and high demand).

Should Tesla gain entry into the S&P 500, it will carry a market cap that would sit just below that of Procter & Gamble and Mastercard, placing it just outside the benchmark's top ten.

Tesla's gains have also attracted the largest-ever amount of cash bet against stock on Wall Street. Short-sellers, which hope for a near-term decline in stock in order to buy it back more cheaply and book the profits, have amassed a near $20 billion position against Tesla shares, according to data from the S3 Partners group.
"The reason behind Tesla’s short squeeze is obvious and straight forward, large mark-to-market losses are forcing out some short sellers as they hit their loss limit thresholds," S3 said.

"Tesla shorts are down - $ 18.08 billion in year-to-date net-of-financing mark-to-market losses. 43% of those losses occurred in just over five weeks of trading with - $ 3.71 billion on mark-to-market losses in June and - $ 4.08 billion of mark-to-market losses in July," the group added.

Nevertheless, confidence in the company continues to grow, because the company has repeatedly proved its reliability. “Institutionally speaking, I talked to men that were haters six months ago. Today it's a top 20 position,” said Wedbush analyst Daniel Ives.

If Tesla does crush its Q2 2020 financial results, it could mean inclusion in the S&P 500, leaving the shorts with little to no choice but to declare defeat. In May, Loup Ventures' Gene Munster forecasted that Tesla had a 60% chance of being included in the S&P 500. TSLA's stock price and market cap continue to rise above companies in the S&P 500 index, slowly turning Munster's prediction into a reality with each passing day.

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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Eva Fox holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

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