Wait, Tesla’s Not Supposed to Gain This Much (TSLA)

TSLA shorts rack up losses of $1.07 billion in a single day.

Tesla TSLA

If you want to know what a true trading nightmare looks like – well, ask Tesla (NASDAQ:TSLA) shorters. Investors betting against the electric car maker lost more than $1 billion Wednesday as the company’s shares rallied almost 10% to $319.50, the most in over two years.

According to estimates from financial analytics firm S3 Partners, short sellers racked up losses of $1.07 billion in a single day. S3’s Ihor Dusaniwsky told CNBC that Tesla bears have lost nearly $5 billion in mark-to-market losses since 2016. TSLA has climbed more than 40% in the same period and has gained 8% year-to-date.

Wenesday’s spike comes a few weeks after Chief Executive Elon Musk bought $10 million worth of Tesla stocks for roughly $298.50 a share. Musk, who in a May 4 tweet predicted a short squeeze – meaning shorters will rush to exit their position as Tesla’s price-per-share increases – got a vote of confidence from shareholders at the company’s annual meeting Tuesday. Musk told shareholders it is “extremely likely” Tesla will hit a “5,000 car week by the end of this month.”

That’s a key production target for the company which has said it won’t generate income until it hits that level. Tesla originally expected to reach that production figure by the end of last year.

Short sellers have been building up massive positions against Tesla. According to S3, the name, which is worth noting, has not had a profitable year since its IPO, is the most heavily shorted in the US, as well as the most heavily shorted automaker in the world. Short interest, currently totaling more than $9 billion, is so high that bears are starting to have issues finding shares to borrow.

Whether yesterday’s spike will do little to dissuade entrenched shorts, that remains to be seen. In the meantime, with 60-65 percent of Tesla’s shareholder base not selling, the name will most likely continue to be a painful one for the shorting crowd.

Tesla shares are down $1.50 at $318 in pre-market hours, about 22% lower than their all-time high.

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