According to statistics from S3 Partners, speculators shorting Elon Musk’s electric vehicle manufacturer’s stock will be sitting on gains totaling $15 billion in 2022 after years of losing bets. Short sellers borrow shares and sell them to make money by repurchasing the stock at a lower price in the future.
Due to the increased interest-rate environment that has brought speculative equities back to reality, Tesla shares have plummeted 61% in 2022, including Tuesday’s 8.1% decline. Investors have also grown more anxious due to Mr. Musk’s acquisition of Twitter Inc.
The stock’s many critics, who watched in shock as it launched a monster run in early 2020 with little regard for fundamentals, have rejoiced at Tesla’s turnaround in fortunes.
On a split-adjusted basis, Tesla started the year trading around $30 and eventually reached its high price of $400 in November 2021. Its worth increased to more than $1.2 trillion, making it one of the largest companies in the United States by market value. A two-year low, $137.57, was the stock’s closing price on Wednesday.
According to Andrew Left, the founder of Citron Research and a well-known stock trader, being a bear on Tesla has not been an easy journey. It’s been a painful transaction, to put it mildly.
Naturally, a lot of Tesla bears left after a while. During the sharp increase in the price of the company’s shares, some were compelled to void their bets and end their positions at a loss. As a result, throughout 2020 and 2021, mark-to-market losses on the trade as a whole were a staggering $51 billion, according to S3.
One of the most frequently shorted American equities is Tesla. The numerous short sellers compelled to buy back shares to settle their loss positions contributed to the pandemic’s quick rise in share prices.
According to S3, low interest in Tesla reached a high of more than $51 billion in January 2021 but dropped to an average of $19.3 billion. Currently, 10% of the company’s free float is sold short on average, which is a decrease from the present level of 3%.
Mr. Left claims that after experiencing losses from a previous short position, he pledged never to trade Tesla again. But last summer, he claims he started to experience “FOMO,” or a fear of missing out, and he dove right back in. Mr. Left claimed he profitably liquidated his position on Thursday but believes the shares have room to fall even lower.
It’s still a pricey stock, he declared. “This is far from over. Things don’t go from expensive to reasonably priced, as most stock traders will attest to. Ordinarily, prices rise to decrease.
According to FactSet, Tesla shares are trading at 42.5 times their 12-month earnings, a significant discount from their peak multiple of 1,765 from January 2021. In contrast, the S&P 500 trades at 17.6 times earnings.
Some facts people previously chose not to pay attention to are now coming to their attention: competition, Saturation. But, unfortunately, people were sweeping many relevant factors under the rug, Mr. Left continued.
Late on Tuesday, Mr. Musk tweeted that he would leave his position as Twitter’s CEO as soon as he found a successor.
A request for comment from Tesla was not immediately complied with. However, in a recent tweet, Mr. Musk claimed that short sellers were “value destroyers” and that short sales should be prohibited.
- Published By Team Hongkong Journalist