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Tesla short-sellers lose $3.5 billion in two days

Tesla short-sellers lose $3.5 billion in two days
Elmaz Sabovic

This week, Tesla’s (NASDAQ: TSLA) report on better-than-expected deliveries has caused significant losses for traders betting against the electric vehicle (EV) maker’s stock. 

Following the second-quarter delivery report, Tesla shares have surged 17% in just two trading days, leading to an estimated $3.5 billion loss for short sellers on a mark-to-market basis, according to data retrieved by Finbold from S3 Partners

The subsequent rise in TSLA shares has made its CEO, Elon Musk, issue a stark warning to TSLA stock short-sellers, including Microsoft (NASDAQ: MSFT) founder Bill Gates.

According to Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners, short sellers have gained “only” $1.37 billion in mark-to-market profits, or 7.6%, year-to-date. 

“Shorting TSLA has been a profitable trade in 2024 until lately,” Dusaniwsky noted. 

However, in June, short sellers have seen their earlier profits diminish, incurring $1.95 billion in month-to-date mark-to-market losses, representing a 10.7% decline.

Tesla shares finished at $246.39 at the latest close on July 3, nearly erasing its annual losses.

TSLA stock YTD price chart. Source: Finbold
TSLA stock YTD price chart. Source: Finbold

Currently, short interest in Tesla stands at 3.8% of the float, or 105 million shares shorted, with a notional value of $25 billion.

TSLA stock short-interest. Source: Fintel
TSLA stock short-interest. Source: Fintel

Cost-cutting initiatives proved to be a solution for Tesla

On July 2, Tesla reported second-quarter deliveries of 443,956 vehicles, surpassing Wall Street estimates of 439,000. While deliveries fell 4.8% from a year earlier, this decline was less steep than the 8.5% year-over-year drop in the first quarter. 

The delivery report suggested that demand for Tesla vehicles remains stronger than feared, but it offered a limited view into the company’s overall performance. Tesla’s auto business faces challenges with a sales decline due to an aging lineup and increasing competition. 

Tesla has been incentivizing EV purchases with discounts, low- or no-interest financing options, and other perks to boost sales for months. For example, in the second quarter, Tesla reduced prices in Germany and Norway and offered zero-interest loan promotions in China, even for its entry-level Model 3 sedan and Model Y SUVs. 

In the U.S., Tesla offered buyers of its rear-wheel-drive Model 3 a three-year, 2% APR financing deal.

All eyes on Tesla’s Q2 earning report

Despite the strong delivery numbers, Tesla’s newest model, the Cybertruck, has faced a slow start. Quality issues led to four voluntary recalls in the U.S. in less than a year.

Tesla’s earnings report, due on July 23, is expected to offer a clearer picture of the company’s financial health. According to analysts, revenue will decline 2.9% to $24.2 billion following a 9% decline in the first quarter. 

This report will be crucial for understanding Tesla’s ability to navigate its current challenges and maintain its market position amidst growing competition and an aging product lineup.

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