Traders betting against Tesla have lost nearly $12 billion so far this year (TSLA)

Getty/Justin Sullivan

• Tesla short-sellers are down nearly $12 billion in mark-to-market losses in 2020 through Wednesday’s close, according to data from financial-analytics firm S3 Partners. 
• That number was fueled by a $1.2 billion mark-to-market loss Wednesday when Piper Sandler raised its Tesla price target to the Wall Street-high, sending the automaker to a record close. 
• Tesla has gained nearly 120% year-to-date through Wednesday’s close. 
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Traders betting against Tesla keep getting burned. 

Short-sellers, or investors who are betting that Tesla’s stock price will fall, are down nearly $12 billion in mark-to-market losses this year through Wednesday’s close, data from financial-analytics firm S3 Partners show. 

That number was fueled by a $1.2 billion mark-to-market loss for short-sellers on Wednesday, when Tesla surged to close at a new high of $917.42 per share. The move came after Piper Sandler raised its Tesla price target to $928, the new Wall Street-high price for the automaker.

Shares of Tesla slipped as much as 5% in intraday trading Thursday. 

Tesla has been surging since October, when the company posted a surprise return to profitability in the third quarter that sent shares higher. Since then, the stock has continued to climb, driven by strong vehicle delivery numbers, a solid fiscal fourth quarter earnings report, optimism around the company’s new China Gigafactory, and a slew of analyst upgrades.

As the stock has climbed, short-seller losses have deepened, and now traders are watching to see if there will be a “short squeeze,” which is when a stock gains so rapidly that traders betting against it are forced to bow out of their short positions, sometimes sending the stock price even higher. 

But a dramatic squeeze might not happen for Tesla, according to S3 Partners. “It is more likely to be a continuous slow decline in shares shorted rather than a sudden abrupt plunge,” wrote Ihor Dusaniwsky, the managing director of predictive analytics at S3, in a February 3 note. This is because of the amount of short hedging being done to offset Tesla convertible bond and option exposure, according to the note. 

A number of high-profile hedge funds have been weighed down by betting against Tesla. Greenlight Capital, run by David Einhorn, underperformed the broader market in 2019, dragged down by short positions in Tesla and Netflix.

In January, funds at GMT Capital run by Tom Claugus and Odey Asset Management led by Crispin Odey lost more than 10% due to short positions in the automaker. In early February, Steve Eisman of “The Big Short” fame told Bloomberg TV that he covered his short position in Tesla “a while ago.”

Still, there are some short-sellers that are digging in their heels. Earlier this month Andrew Left, the notorious leader of Citron Research, said that he’s short Tesla again, after previously promising he wouldn’t bet against the stock. In addition, Tesla is the most-shorted stock in the US. 

Tesla has gained nearly 120% year-to-date through Wednesday’s close.

Markets Insider