Tesla Short Sellers Have Lost $23 Billion+ In 2020 Reveals Research Firm

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Shares of electric vehicle and renewable energy products manufacturer Tesla Inc (NASDAQ:TSLA) have reached record highs on the stock market recently, as investors express their optimism about the company's upcoming earnings report for Q2 2020 and about the prospects of Tesla finally making it into the coveted Standard and Poor 500 stock market index.

Owing to the uncertainty of Tesla's production capacity and its ability to meet customer orders, the company became a favorite target of short-sellers. These are investors who 'bet' that a company's share price will drop in the open market due to structural deficiencies within the company's operations, poor balance sheet management, unrealistic management expectations and a myriad of other reasons. This rise will affect short-sellers, who have also had to experience significant losses due to the nature of their investment decisions about Tesla in the past as well.

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The extent of these losses has become clear as fresh data from S3 Partners LLC makes some startling insights.

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S3's data reveals that as of Friday, Tesla's short interest stood at $21.47 billion, with roughly 14 million short interest shares representing approximately 9% of the company's outstanding shares. Over the course of thirty days prior to Friday, Tesla's shorted shares fell by 1.58 million as the company's share price skyrocketed by more than 60% during the same time period.

Over the course of last week, shorted Tesla shares fell by 59K as they continued to reflect on the massive share price gains made by the company. But, while these facts are interesting in their own right as they provide details about investor sentiment, they are not the hallmark of the latest data from the research firm.

Short Interest of NASDAQ:TSLA is at a historic low as the share price reaches new highs. (Image Credit: S3 Partners, LLC)

Instead, it's the losses incurred by short-sellers year-to-date and yesterday that are the truly shocking components of the data. As per the research firm, these investors have lost $23.22 billion in 2020 alone, and over the course of yesterday's share price gain that lasted until late noon, the losses stood at $2.7 billion at 13:10 ET. The $2.7 billion figure is based on the 12.7% share price gain that Tesla exhibited yesterday, and the subsequent price drop that occurred during late trading hours is bound to have reversed this loss as the automaker's shares closed lower on Monday.

As trading commences today, Tesla is regaining some of its lost momentum based on several factors which include a price target hike by Piper Sandler and new business opportunities in China. The shares were up 4% in pre-market today based on reports in the Chinese media about negotiations between Tesla representatives and those from the southwestern city of Chongqing. Tesla is believed to have been represented by vice president Tao Lin and the government delegation was led by official Duan Chenggang as per the city's WeChat social media account.

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The move looks to expanding Tesla's facilities in China, where the company has performed strongly in the post-pandemic economic environment. China's electric vehicle market is one of the largest in the world, and as opposed to North American and European markets, it has a myriad of local competitors that make up for tough competition for Tesla. With economic uncertainty continuing to make its presence known in the West, analysts and investors expect China to come to Tesla's rescue, with the only limiting factor being the company's ability to effectively meet all of the company's electric vehicle demand.

The company is set to report earnings for its second quarter of 2020 on the 22nd and key points on the agenda will be bottom-line performance and vehicle delivery estimates. Despite a global economic downturn, Tesla is yet to revise its self-set target of half a million vehicle deliveries by the end of this year and investors and analysts will be on the lookout for changes to this later this month.