Tesla’s Stock Success Has Cost Short Traders $3.7 Billion This Year

3 weeks ago by Sebastian Blanco 35

Tesla logo

That’s more than any other company.

Even if you don’t own any Tesla stock, if you’re a fan of electric vehicles you’ve probably been paying at least a little bit of attention to the rise and fall of TSLA. And, if you’re into schadenfreude and like Tesla CEO Elon Musk, then you’ve probably been enjoying the losses that short traders are currently facing thanks to the stock’s record-setting rise these past few months. According to Automotive News, the people who have been betting that Tesla will fail have lost a collective $3.7 billion in this year. Let’s repeat that: people betting against Tesla and Musk have lost almost four billion dollars in the first four months of 2017. That’s more than shorters have lost on any other U.S. company this year. Ouch.

The numbers come from a financial analytics company called S3 Partners. Automotive News says that S3 has calculated that there are $10.1 billion worth of short bets against Tesla right now, up from $8.7 billion a month ago. At the end of 2016, TSLA was worth $213.69. It closed at $318.89 yesterday. As Greenlight Capital funds wrote to its investors in late April, its short in Tesla was one of the fund’s “biggest losers.” As Ihor Dusaniwsky, S3 Partners’ head of research, told AN, “You have your momentum guys riding this stock up and making a fantastic return, and the fundamental guys holding onto their shorts and building them and saying ‘this can’t continue’ and waiting for the shoe to drop. It’s one of your classic yin and yangs on Wall Street.”

We have no idea where TSLA will go from here (and don’t own the stock), but some think that a single share of Tesla might be worth $1,000 before too long. How much do people stand to lose then?

Source:Automotive News

Tags: , , ,

36 responses to "Tesla’s Stock Success Has Cost Short Traders $3.7 Billion This Year"

  1. tftf says:

    In the end and over the long run, stock valuations will return to medians based on actual profits and (free) cash flows.

    Add to that general euphoria in the stock market.

    I have been called a fool in 199-2000 (dotcom bubbble) and in 2007 (shorting the house bubble) as I bought puts.

    I am being called a fool again in 2017 as Tesla crossed $300.

    We will see how this one plays out by around 2020 – or well before if the overall stock market tanks.

    (And there’s this thing called diversifcation. In contrast to some retail TSLA longs who went all in on SCTY and TSLA I actually diversify).

    This time is not different.

    1. Big Solar says:

      At this point I would not be willing to bet Tesla will not be profitable by 2021.

      1. DJ says:

        Whats that have to do with anything? I mean seriously they lose $ and they’ve got a crazy valuation, what tftf is saying is that regardless if they’re profitable or not the stock may settle down to the normal rules that typically govern stock prices.

        1. Big Solar says:

          Yea sorry I hit reply instead of whatever the other button is called.

        2. tftf says:

          Yes, take for example a peer comparison to the current leader in global EV sales:

          – Renault-Nissan (Renault owns 44% of Nissan) and new alliance partner Mitsubishi sell close to 10 million cars per year – a volume within striking distance of GM, VW and Toyota.

          – The market doesn’t appreciate its leadership in electric vehicles. Nissan-Renault is tied with GM (2017 Bolt) to offer the first mass-market cars with long range (2018 LEAF, 2017 ZOE):

          – Renault currently has a market cap at only half that of media darling Tesla (diluted) – while Renault maintains a P/E ratio below 7, with good cash flows and dividends.

          1. Nix says:

            tftf — How does TSLA compare to other car companies with similar growth rates that Tesla is experiencing? Because none of those companies come anywhere near close to TSLA growth rates.

            Oh, what is your record on making predictions on TSLA? When did you first predict that TSLA would break 300? Please post a link.

            Also, when did you predict Tesla would sell 200K cars, if you are a TSLA expert? Please, also provide a link.

        3. paul smith says:

          This stock is anything but normal.

    2. Boris says:

      So you called both recessions at the right time? And you stopped shorting also at the right time? I have a hard time believing you, as very few people can do such thing.

      1. Pushmi-Pullyu says:

        To those who don’t agree that playing the stock market is a form of gambling, I just point to the fact that gamblers and stock investors both typically refuse to admit when they’ve lost money playing.

        I of course don’t know if Tftf (or zzzzzzzzz, or Four Electrics, or DonC, or DJ, or Sven) has made a net loss in shorting TSLA, but I’m pretty sure of one thing: They would never admit it if they did!

        * * * * *

        FIRST POKER PLAYER: Well, how did you do?

        SECOND POKER PLAYER: Leaving with more than I came with! You?

        FIRST POKER PLAYER: Won a few.

        FIRST POKER PLAYER: Oh, how you make out?

        THIRD POKER PLAYER: Oh, I made a couple of bucks. And you, Manduke?

        MANDUKE: I’m a winner!

        BILL GRANT (George Burns): Another great game, not a single loser!

        (All laugh)

        — “Just You and Me, Kid” (1979)

    3. Nada says:

      The problem with short thinking is Tesla is not a buble even if their stock seems overpriced…
      They sell the best (and most by end of year) EVs on a ever growing EV market that will keep growing and growing untill only EVs are sold…
      Thus Tesla will sell more and more and more…

      1. Big Solar says:

        Yes, you said this better than me. Thanks 🙂

      2. Terawatt says:

        Can you come up with any objective, numbers-from-SEC-filed-financial-reporting-based definition of a bubble that doesn’t include Tesla? If so, what companies have by this definition ever been stock market bubbles?

        I bet you can’t.

        1. Nix says:

          Rapid growth and bubbles are not the same thing. A bubble is when a company can never grow into the valuation, so the bubble bursts.

          But growth company valuations where future product successes are already baked into the price is not the same as a bubble. The valuations are just ahead of those future earnings.

          And yes, Tesla absolutely can grow into their current valuations. But all the shorters who told us that the Roadster would never get sold, and the Model S would never get sold, and the Model X would never get sold, and the Model 3 won’t be sold until 2019 or 2020, etc won’t tell you that. But we can see how bad their track record has been….

      3. Someone out there says:

        The market is growing yes but that doesn’t mean Tesla will be leading it. Come 2019-2020 there will be a ton of competition for Tesla and it will only get tougher from there on. Once the big players start selling their proper, full range EVs they are going to sell A LOT of them.

        1. Pushmi-Pullyu says:

          So, you’re saying that unlike every single disruptive tech revolution of the past, all the existing market leaders will retain their positions. None will fall behind and go out of business, and no new market leaders will emerge.

          Where are Eastman Kodak or BlackBerry today? How about the Stanley Motor Carriage company, maker of the formerly best selling Stanley Steamer automobile?

          Your scenario is not mathematically impossible, but certainly history strongly indicates otherwise!

        2. Nix says:

          Someone WAY out there — We’ve been hearing that same story since 2008 when the Roadster was delivered.

          Folks like you (maybe including you) said that bigger companies could do a better job. And yet when Chrysler attempted to basically copy the Roadster by using a Lotus and making it an EV, it was Chrysler’s product that died months after the Roadster went on sale:

          http://www.greencarreports.com/news/1037984_chryslers-envi-electric-vehicle-program-cancelled

          Folks like you have been saying the same thing about the Tesla Model S since 2012 when it came out.

          If all these other companies are supposedly so superior to Tesla, why didn’t THEY build their own Model S competitor in 2011 and beat them to market? It isn’t like the Model S was some secret, or that Tesla got it to market super fast. 2011? 2012? 2013? 2014? 2015? 2016? 2017?

          The Model S was first announced in 2008. If the rest of the car makers take until 2020 to build a Model S competitor, that does not bode well for them.

      4. tftf says:

        The most? I highly doubt it. See:

        Renault-Nissan Alliance

        No. 1 in global EV sales:

        455,061 units

        (cumulative as of 31st March, 2017)

        http://blog.alliance-renault-nissan.com/

        Details in my recent article on Renault, but I don’t want to link to my own material again.

        1. jamcl3 says:

          Renault “gets it” more than Nissan does, but not by much. The integrated charging in the Zoe is a huge competitive advantage. But I suspect Continental developed that, not Renault. (And Chademo a sad joke of course.) Neither of them are developing long range charging networks, the legacy OEMs think someone else should do that (it is not like gas stations but they don’t get it). And probably the biggest issue is that the legacy OEMs are all using synchronous electric machines, which are neither sustainable nor competitive. So no, I see no sign of the legacy OEMs being a threat to Tesla. But hey, short away if you want. It is a free country.

    4. ffbj says:

      Hardly a valid comparison, though one that is commonly used by many.

    5. Nix says:

      tftf — keep shorting Tesla. Your money you lose in short squeezes just drives up TSLA prices and puts money in Tesla’s pockets when they raise money.

      How much of the $3.7 Billion is your money you’ve lost this year? How have your 2017 shorts paid off?

  2. Steve says:

    I suspect that the enthusiastic shorting of the stock is partly coming from wealthy folks brainwashed by the anti-EV bias of conservative media. Seeing them get screwed by their own propaganda feels good, in a way.

  3. TomArt says:

    If you gamblers (shorters) want to talk about facts and numbers, then let’s point out the fact that, eventually, you will probably be right. It’s like betting on the Sun running out of hydrogen and helium for fusion reactions in the core. You’ll definitely be right…if you wait long enough.

    What most of us are laughing at is you gamblers betting on failure as the GF goes online…as the SC network expands at a dramatic pace…as the Model S is on it’s way to a 3rd straight year as one of the global best-sellers in its class…

    …we are laughing at you betting against the clear and unequivocal momentum for Tesla’s products as they continue to sell, continue to improve, and continue to outclass the competition.

    Even with the inevitable drop-off in automotive sales, Tesla EVs continue to be in high demand, with sales percentages dropping off less (if at all) than most other makes and models of all other vehicles (EV or ICE or hybrid) on the market.

    Your shorts would make more sense in about a year, just before many of the ballyhooed “Tesla killers” start rolling off competitors’ assembly lines.

    Or, they would make more sense in another month, right before the Model 3 comes out, betting on the likelihood that the launch will be delayed (or the initial quality is terrible, etc.).

  4. tftf says:

    “Your shorts would make more sense in about a year, just before many of the ballyhooed “Tesla killers” start rolling off competitors’ assembly lines.”

    But then again everyone keeps telling me that the stock market is “forward-looking”.

    1. Pushmi-Pullyu says:

      So what are you saying; that you are not forward looking?

      If so, then for once I would agree with you! 😀

  5. Kdawg says:

    Isn’t the money only “lost” when the stock is sold?

    1. Doggydogworld says:

      When you sell a stock short you receive cash. However, your brokerage restricts that cash for the eventual buy-to-cover. If the stock declines they release some of the restricted cash and you can actually spend it. But if the stock goes up you must post more cash (or other collateral). So these losses are quite real.

      That said, a lot of TSLA shorts own the convertible bonds. When the stock rises they lose money on the short but make money on the converts. So it evens out. Not sure how much of the $3.7b the article claims would be offset by such hedges, but it’s meaningful.

    2. Sopfu says:

      When short selling, the person shorting is paying rent on the stock, so they are continuously losing money. The hope is that the price will drop faster than the rent payment.

      Rent is expensive because the market for shorts is so strong, too.

      IMO, the stock is going to drop because Tesla will not be able to meet expectations with model 3 – despite the car being exactly what Musk is promising. But I’m not sure the shorters will actually make much money, either.

      1. ffbj says:

        Yeah, it’s like dividend in reverse.
        Shorts have gotten hammered in Tesla stock. They can say whatever they want but if you have had a short position in TSLA over the years, you have lost money big time, to say nothing of the opportunity cost.

        Currently the stock is overpriced imo. My fair value est. is around $240, so now would be the time to short it, though nothings ever fair in the stock market.

        1. ffbj says:

          Also it should be pointed out that you must maintain a margin, usually 40%. When the stock goes up from where you shorted it, say at $300 to a higher price to maintain margin you must add to that money.

          “Margin Call. A margin call is a broker’s demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when the account value depresses to a value calculated by the broker’s particular formula.” –Investopedia

          If unable to meet a margin call, well that is not good:
          “If you are do not meet the margin call, your brokerage firm can close out any open positions in order to bring the account back up to the minimum value. Your brokerage firm can do this without your approval and can choose which position(s) to liquidate. In addition, your brokerage firm can charge you a commission for the transaction(s). You are responsible for any losses sustained during this process, and your brokerage firm may liquidate enough shares/contracts to exceed the initial margin requirement.

          Read more: What happens if I cannot pay a margin call? If you are do not meet the margin call, your brokerage firm can close out any open positions in order to bring the account back up to the minimum value. Your brokerage firm can do this without your approval and can choose which position(s) to liquidate. In addition, your brokerage firm can charge you a commission for the transaction(s). You are responsible for any losses sustained during this process, and your brokerage firm may liquidate enough shares/contracts to exceed the initial margin requirement.

          Read more: What happens if I cannot pay a margin call? http://www.investopedia.com/ask/answers/12/what-happens-cannot-pay-margin-call.asp#ixzz4g33dQ200

    3. Pushmi-Pullyu says:

      “Isn’t the money only ‘lost’ when the stock is sold?”

      For a normal investor, it’s true that any loss is only a loss on paper until you sell the stock. But “shorting” a stock isn’t a normal investment. I don’t understand all the details about margin calls, but I’ve seen it said that while the amount you can lose in normal investing is limited to what you actually invest, in “shorting” a stock the amount you can lose is unlimited! (Perhaps someone else can explain that, because I certainly don’t understand it.)

  6. Get Real says:

    Shorting is nothing more then gambling and serial anti-Tesla troll and shorter tftf is lying out his rear-end by claiming he isn’t losing money.

    The fact of the matter is that tftf and the Spiegel’s of this world are actually helping to finance Tesla’s incredible CAPEX for their future large scale manufacturing and sales by losing their money (and their shorts)!

    1. ffbj says:

      To be fair to tftf, (lower case letter mafia member, in good standing) he probably did do better than most by using proximity triggers, Bolinger bands, or some methodology to short & cover. He mentions reversion to the mean which is often sited in commodities trading, Williams % R stuff, which is great. It’s the very volatility that attracts the shorts, like moths to a flame, but a bug-zapper to many.
      Still, not my cup of tea! Clean cup, Clean cup, move down.

    2. SopFu says:

      Going long on any stock is also gambling. Besides, all the shorts will eventually need to be closed, which is going to help everyone owning stocks because closing shorts drives the price up. If you’re long, shorts are a good thing. (Or they indicate that you’re wrong….)

      1. Get Real says:

        No really.

        Going long implies putting long-term gain first and the fundamentals that drive it so it is really a long-term investment.

        Shorts are only going for potential short-term profits and they have no control over whether they win or lose and that my friend is what I call gambling.

Leave a Reply