Tesla Inc shares jumped over 12 percent on Tuesday after long-time critic and short-seller Citron Research stated it had a change of heart and is now betting the automaker’s stock will boost.
The firm stated in a research note that Tesla’s Model 3 sedan is a “proven hit” and serious rivalry from other automakers for the plug-in auto market has not materialized, marking a sharp reversal from its former stance.
Tesla will show third-quarter earnings after the market close on Wednesday, a week before than it has generally reported.
CEO Elon Musk has promised a Model 3’s increase will help make Tesla profitable in the quarter, and has stated the automaker should not have to sell more shares to gather cash.
But a number of Wall Street experts say the increase, added to other production promises and debt obligations, make some sort of capital raise possible.
Citron’s change of opinion came just a month after the Andrew Left-led firm took legal action against Tesla and Musk, saying Musk fraudulently engineered his postponed plan to take the automaker private to “burn” short-sellers. Citron stated it was not withdrawing its lawsuit against Musk and Tesla.
“I would not short this again. I understand that industry better and I think the company just turned the corner,” Left told Reuters.
The reversal does not necessarily indicate a broader capitulation by Tesla’s other short-sellers.
Tesla short-sellers had been including positions over previous week, according to Ihor Dusaniwsky of S3 Partners, and the company has the second-biggest short interest behind Apple Inc.