Tesla's $100 billion rally costs short sellers at least $1 billion

A recent rally in Tesla shares (TSLA) has meant some serious pain for short-sellers who had enjoyed a successful spring betting against the electric carmaker.

Short-sellers betting against Tesla lost at least $1 billion on Thursday alone, according to data from S3 Partners, as the stock rallied 10% following the company’s latest quarterly report.

Shares finished Thursday’s session at $815.12, their highest close since May 6.

Tesla was little-changed on Friday afternoon amid a broader sell-off in tech stocks.

Data from S3 showed showed Tesla shorts were down $1.01 billion in mark-to-market losses as of mid-day Thursday, when shares were trading closer to $800 per share. Total losses are expected to be even higher when accounting for the full day’s 9.8% gain.

“The end of ‘supply chain hell’ may turn into a ‘short squeeze hell’ for Tesla short sellers as Elon Musk says the firm has the ‘potential for a record breaking second half of the year,’” S3 Partners’ Ihor Dusaniwsky and Matthew Unterman said in a note published Thursday.

Since July 18, Tesla’s market cap has risen about $100 billion, from ~$750 billion to around ~$850 billion as of Friday afternoon.

For short-sellers, Tesla has been the worst performing bet in dollar terms so far this month, as several FAANG, crypto, and meme stocks have rebounded after a rough first half of this year.

Tesla shares, for instance, fell some 36% in the first six months of 2022, with the company’s market cap going from $1.2 trillion at the beginning of this year to $650 billion at its nadir on May 24.

Apple (AAPL), Amazon (AMZN), and Nvidia (NVDA) follow Tesla as the worst performers for short sellers this year in dollar terms.

A view of the Tesla service centre in Singapore July 16, 2022. REUTERS/Chen Lin

Tesla’s latest rally follows second-quarter earnings that came in better than Wall Street had expected, despite concerns production would drop due to lockdowns at its Shanghai factory.

Tesla reported adjusted earnings per share of $2.27 on revenue of $16.9 billion during the period. Analysts surveyed by Bloomberg had anticipated EPS of $1.83 and revenue to come in at $16.88 billion. The company also stood by its outlook to achieve 50% annual growth in vehicle deliveries over the next several years.

“We have the potential for a record-breaking second half of the year,” CEO Elon Musk said Wednesday on a call with analysts. “The past few years have been quite a few force majeures, and it’s been kind of supply chain hell for several years.”

Shares of Tesla are still down 30% year-to-date. And for the year, TSLA shorts remain profitable, up $6.34 billion in year-to-date mark-to-market profits and 29.6% in 2022 as of midday Thursday, per S3.

Tesla also remains the largest short in the U.S. and worldwide.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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