Tesla Short Selling Set To Commence Tomorrow At Market Open After SEC Restriction Expires

Feb 6, 2020
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At this point, if there's one thing that can be said for certain it's that Tesla Inc (NASDAQ:TSLA)'s chief executive officer Mr. Elon Musk should be a very happy man. His company has rocketed to new heights on the stock market this week, and despite the correction that took place yesterday, Tesla's still trading in the $750 range at the time of writing.

Mr. Musk's war with the short-sellers is well known, and as trading came to a close today, Tesla's founder will finally have one reason to be slightly melancholic. After the electric automaker and energy storage product manufacturer's share price dipped significantly yesterday, the Securities and Exchange Commission enforced its Rule 201 to limit short sellers to conducting transactions only when Tesla's share price demonstrated a positive, upward movement.

Tesla Shorted Shares Dropped Before Vehicle Deliveries Report; Shanghai Gigafactory Severely Underutilized?

SEC Rule 201 Limiting Short Selling of Tesla Stock Expired At End Of Trading Today

With the close of trading today, Rule 201 for Tesla's shares is no longer in place, meaning that investors looking to profit from a drop in Tesla's shares are free to sell when the stock is exhibiting a downward momentum. Rule 201, also known as the Uptick Rule, comes into effect when a security's price exhibits a drop exceeding 10%. It comes into place to stop unsavory individuals or groups from further driving down the price by aggressively unloading their positions on the market.

As Tesla soars to new highs on the market, short sellers have taken mindnumbing losses. Data shared by S3 Analytics, cumulatively, investors shorting Tesla's stock have lost $16 billion on the open market since 2016, and more than $20 billion since the company was incorporated. Additionally, owing to the stock's recent run, losses exceeding $7.41 billion have occurred during the course of this year.

Tesla stock first exhibited signs of sharp drops near the close of trading on February 4th; Yahoo! Finance

The fate of Tesla's share price also seems to be tightly tied with news from China. The stock's recent upward momentum kicked off late last year when analysts became positive about Tesla's ability to deliver with the Gigafactory 3 in Shanghai. Then, as the year came to an end and vehicles started rolling off of factory floors, the stock surged to new highs on the market.

However, amidst this run came the Coronavirus. Tesla's shares dipped yesterday, with the drop being correlated by some to the company's admittance on the Chinse social network Weibo that the virus would indeed affect output from the Gigafactory 3. Tesla hopes to produce 10,000 vehicles from the Gigafactory per week optimally, and once the company meets this target, expect its share price to exhibit further momentum. By the end of this year's first half, the company also hopes to produce 500,000 annual Model 3s from the China-based plant.

Following the Gigafactory 3, the electric automaker has plans to drastically scale up its fourth Gigafactory in Germany's Brandenburg province. Tesla's top executive has also speculated on the possibility of opening another Gigafactory in the Americans state of Texas - where his space exploration company SpaceX is also assembling interplanetary transport vehicles.

For a company renowned to be struggling with production issues and vehicle deliveries, Tesla's come a long way forward. The company exhibited profitability in its last quarter, and with its recent positive outlook, many are speculating that soon, it will be a part of the Standard and Poor 500 stock index. Analysts have also gone as far as to set price targets in the range of $7,000/share for Tesla ten years from now, and for our end, we hope that Tesla can meet the high expectations set around it. For now, we'll have our eyes set on what happens once trading commences tomorrow.

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