Tesla Shorts Rebuild Positions As Shares Tumble (TSLA)

Tesla shorts are undoubtedly pleased with another day of steady declines in the stock, although most still have a long way to go before they even approach breakeven on their positions. Tesla stock (TSLA) is down by another 6% on Thursday after Wednesday’s 7% decline. It seems investors were disappointed with the number of vehicles the company delivered during the second quarter, and analysts were quick to call the number into question.

Tesla Shorts Shares

Tesla shorts see a bit of light

It’s been a painful year for Tesla shorts, as the longs were up by nearly 80% at the stock’s peak last month. Since peaking on June 23, Tesla stock (TSLA) has lost more than $70 in value, which would enough for short-sellers to throw a party if we were talking about virtually any other stock.

Data from financial analytics firm S3 Partners indicates that Tesla shorts were down $5.4 billion in mark to market losses year to date on an average short of $9.05 billion, resulting in a -59.5% return for the year. Tesla stock has been falling steadily since its peak last month and now is down by about 20% in only two weeks.

Still a long way before Tesla shorts will break even

According to S3 research head Ihor Dusaniwsky, short interest in Tesla (TSLA) peaked at $10.96 billion on June 14 and since has fallen to $8.9 billion. He adds that in only three trading days, Tesla shorts are up $1.39 billion. Still, they’re not even half of the way to breakeven, as they’ve recouped $2.01 billion of their losses over the last two weeks, with $3.38 billion left to go.

He adds that 1.5 million shares that had been sold short have been covered since mid-June, but he has since observe that some Tesla shorts are starting to rebuild their positions. He explained that more than 400,000 Tesla shares have been borrowed this week.

Dusaniwsky also added that as notional short exposure to Tesla fell with the stock price, he didn’t observe short-sellers topping off their positions to keep their notional exposure stable. Instead, he explained that Tesla shorts were content to accept their unrealized profits rather than adding to their positions. However, as short exposure to Tesla closed in on $9 billion, they started to sell shares to build their positions so that they could take advantage of the recent weakness in the stock.

Short interest to stabilize

He predicts that short interest in Tesla will stabilize somewhere between $9 billion and $10 billion as short-selling continues to increase as (TSLA) the stock price falls.

“Tesla shorts may be one of the only stocks that is totally immune to a price short squeeze, and with ample lendable stock borrow inventory available, there is little chance of a technical stock loan related short squeeze,” Dusaniwsky believes. “It seems that we are only in the initial laps of a long term race, only several hours into the 24 hours of Le Mans or Daytona.”