Tesla Shorts Experienced a Scary October, Says S3's Ihor Dusaniwsky

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Tesla's (NASDAQ: TSLA) short interest was once again a hot topic of conversation as the company's share price surged more than 30% in October and shares joined the $1 trillion market cap club. As a result, sellers in short positions again find themselves deeply in the red, and the expectation of a significant contraction in short positions increases. According to a new research note from S3's Ihor Dusaniwsky, Tesla shorts are experiencing a "Scary October."

The analyst reported that as of October 26, TSLA short interest was $30.15 billion, 29.61 million shares shorted, 3.64% Short Interest% Float, 3.51% S3 SI% Float (which includes the synthetic longs created by every short sale in the trade float denominator), 0.30% stock borrow fee.

The data shows that TSLA is the largest equity\ADR short in the U.S. market even after being squeezed for most of 2021 due to accumulated net-of-financing mark-to-market losses. In addition, Tesla is the largest short in the Auto Manufacturing and Construction Machinery & Heavy Truck Sectors. There are a total of twelve electric vehicle stocks in the top thirty short positions in sectors, and they account for 59% of all short sales in sectors.

Tesla short sellers have been in a multi-year squeeze with shares shorted declining in the second half of 2019, all of 2020, and most of 2021. With Tesla in a multi-year rally, short sellers have trimmed their positions as mark-to-market losses mounted. Even as shorts bought-to-cover shares, their dollar short interest continued to climb as Tesla's stock price surged. Total $ short interest hit its high point of $51.0 billion in January of 2021.

Continued short selling in 2021 brought Tesla's shares shorted and SI% Float to three-year lows in August of 2021. Over the last two months we have seen a resurgence of Tesla short selling, bringing Tesla shares shorted off its lows in both shares shorted and SI% Float.

Over the last thirty days [the note published October 26] we saw a +1.19 million increase in shares shorted, worth $1.22 billion. This was a +4.2% increase in shares shorted even as Tesla's stock price rose +32%. Over the past seven days, we saw +308 thousand shares of new short selling, worth $313 million, a +1% increase in shares shorted with Tesla's stock price rising +18%. Tesla short sellers seem to be shorting into the rally expecting a pullback from a supposed overbought or overheated market.

Tesla shorts are down $52.8 billion in net-of-financing mark-to-market losses since 2019, with most of those losses occurring in 2020. Tesla short-side mark-to-market losses prior to October 2021 were “only” $2.0 billion but Tesla's recent price surge added $7.2 billion in mark-to-market losses in less than a month.

© 2021, Eva Fox | Tesmanian. All rights reserved.

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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 shares 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.