Short sellers suffer heavy losses on Tesla stock

Compared to other companies in the US, Tesla shares caused the heaviest losses for short sellers last year, with more than 12 billion USD.

Financial analytics firm S3 Partners estimates that short sellers lost a total of $12.2 billion last year on electric carmaker Tesla, a figure that isn’t surprising given that the company’s stock has more than doubled in 2023.

Short selling means that investors borrow shares to sell at the market price, then buy them back in the future to pay back. So if the price goes down, they can buy them back at a cheaper price and make a profit. But if the price goes up, they will lose money. And the loss is unlimited.

The US stock market was strong last year. The S&P 500 index rose 22%, costing short sellers a total of nearly $195 billion, S3 estimates. But the biggest loss was on Tesla, which was bigger than the losses on Microsoft and Meta Platforms combined.

The $12.2 billion figure is even larger than the total damage to the U.S. economy from last year's auto workers' strike, which was $10 billion, according to estimates by Anderson Consulting Group.

Tesla shares doubled in price last year. Chart: Google Finance — Tesla shares doubled in price last year. Chart: *Google Finance*

Tesla has been a prime target for short sellers for years. Many investors believe the company is overvalued, as it is now the world’s most valuable automaker despite selling a fraction of the volume of established automakers.

In the fourth quarter of 2023, Tesla delivered a record number of vehicles, with more than 484,000 units. This number exceeded market forecasts and reached the 2023 target.

However, in the third quarter of 2023, Tesla recorded only $23.35 billion in revenue and $2.3 billion in profit. Profit decreased 37% compared to the same period last year and was also the lowest in 2 years.

Short sellers’ losses this year are in stark contrast to 2022, when Tesla’s stock fell 65%, leaving short sellers with a $15.9 billion profit. Still, Tesla’s stock has left the group with a net loss of $61.8 billion since its 2010 listing, according to S3 estimates.

Ha Thu (according to CNN, Yahoo Finance)

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