Tesla (TSLA) shorts take an estimated $2 billion of losses in Elon Musk’s ‘next level burn’

Last month, Tesla CEO Elon Musk bought $10 million worth of Tesla stock (TSLA) just as he predicted a short squeeze that would be a ‘next level short burn of the century’.

A month later, it looks like his prediction is already starting to become reality as Tesla’s stock price is rising and people betting against the company are reportedly losing billions of dollars.

Short sellers on Wall Street have been building up massive positions against Tesla. As of the last report, the bet was worth as much as $12 billion and short sellers are starting to have issues finding shares to borrow, which increases the borrowing fees.

But that was only the beginning of their issues.

In June alone, the stock has increased by 20% – mostly from a record day following Tesla’s annual shareholder meeting.

Yet, people with short interest on Tesla are holding on. Even though they are taking losses on paper, only a small percentage have covered their position and the rest are still hoping for a crash.

Ihor Dusaniwsky, an analyst at S3 Partners, a firm following short interest, commented:‏

I keep getting asked if $TSLA's price action is due to a short squeeze, it's not,only 1.1 million shares were covered in June, 3% of shares shorted & less than 1.5% of trading volume vs a 22% price spike. Now if you look at the attached chart you can see the $HLF short squeeze. pic.twitter.com/j544DanWPw

— Ihor Dusaniwsky🇺🇦 (@ihors3) June 12, 2018

According to the analyst, Tesla shorts have lost about $1 billion this week alone and about $2.4 billion in June.

But the overall short interest position on Tesla is still over $12 billion – meaning that a lot of people with a lot of money are still betting on Tesla to fail:

$TSLA up 4.3% today, following a 4.5% jump yesterday. #Tesla short interest is $12.6 bn, 37.9 mm shares or 29.9% of the float. Shorts were down $549 mm in mark-to-market losses yesterday and are down another $540 mm today. June MTM losses are now $2.4 bn & YTD losses are $1.8 bn. pic.twitter.com/9rJqXLFdAR

— Ihor Dusaniwsky🇺🇦 (@ihors3) June 12, 2018

Musk predicted that it would be a rough ride for shorts and it is starting to be, but Dusaniwsky’s analysis also confirms that Tesla’s stock is still not experiencing a significant short squeeze as Musk predicted.

Electrek’s Take

I have been pushing for a while now that Tesla’s stock price and financial success are closely linked to their mission even though it doesn’t sound like it at the surface.

There are a lot of ways to accelerate the advent of electric vehicles and renewable energy, but I think having a financially successful company making it its business is one of the most important factors.

While there’s no doubt that many automakers were encouraged to start or accelerate EV programs because of Tesla, many of them still don’t see a viable business behind it.

If Tesla can prove that it can be profitable selling those products, it would be a game changer.

As for Musk’s prediction, while we might see the beginning of what he was talking about, I think it will be more closely tied to Tesla achieving profitability in the second half of the year.

Back in 2012, Musk commented on the short interest of 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.

Most of Wall Street still doesn’t believe that Tesla can go back into the black by the end of the year. If they do, and tough decisions like slashing 9% of their workforce help toward that goal, then Musk’s prediction is more likely to happen in my opinion.

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