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Tesla (TSLA) starts 2018 with a rally costing shorts over $1 billion

Tesla’s stock started the year rallying over 14 percent in just a few weeks and now the automaker’s detractors on Wall Street are feeling the pain with reportedly over $1 billion in losses already.

Ever since the California-based automaker went public, its stock often shows up the list of the most shorted stocks on the market, which means that investors are betting that the stock will lose value.

Back in 2012, CEO Elon Musk commented on the short interest on Tesla’s stock and warned that anyone holding a stock position against the company will have a “tsunami of hurt” coming for them. During the 12 following months, Tesla’s stock price increased by 461% – much of which was attributed to a short squeeze after Tesla reported its first quarterly profit in Q1 2013.

The CEO was back it last year after shorts reportedly lost almost $5 billion on Tesla and now this year, they are off to a bad start.

Short interest expert Ihor Dusaniwsky reported last week that the bet against Tesla was now worth $10.5 billion:

He estimated the shorts lost about $800 million on Tesla in the first two weeks of the year and the stock kept climbing of the past week – bringing the loss to over $1.1 billion.

Among the investors “feeling the pain, famed hedge fund manager David Einhorn initiated a short position on Tesla and attributed the company’s performance to his fund missing its goals in 2017.

JP Morgan also recommended that investors short Tesla going into the new year. They predicted that Tesla’s stock would fall 40-percent over the next 12 months. Almost two months into their prediction, Tesla’s stock is up 16%.

Electrek’s Take

As I have often mentioned in the past, Tesla’s stock price is important for the company, but also for the future of EVs in general. There’s nothing that can send a stronger message to legacy automakers than proving financial success by selling electric vehicles.

Of course, a high stock price is not always an indicator of financial success, which is what shorters are betting on when it comes to Tesla.

The Model 3 production delays have been encouraging for people with short interest on Tesla, but now that the worst part of “production hell” seems to be over, Tesla could be quickly transitioning from a niche automaker to a major car producer.

It will be interesting to see how the market reacts to that over the next year.

What do you think? Let us know in the comment section below.

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