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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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.