Tesla Inc shares soared 16 percent on Thursday, a day after the automaker’s better-than-expected quarterly report, and financial expert firm S3 Partners stated short-sellers were slammed with $1.7 billion in paper losses on the day.
S3 stated the day’s losses pushed the aggregate year-to-date performance of short-sellers in automaker into the red. Short-sellers aim to profit by selling borrowed shares, hoping to purchase them back later at a lower price. Tesla is the most shorted U.S. stock.
Tesla short-sellers had, on paper, been up $276 million for the year until Wednesday. Following Thursday’s stock surge, they now have losses of about $1.4 billion for the year, S3 data revealed.
“We are not seeing a large amount of buy to covers yet,” stated Ihor Dusaniwsky, head of research at S3 in New York, talking about the traders that are buying shares to close out an existing short position.
“With such a large price move on the open, majority of short-sellers that are looking to cover are waiting for a retracement before placing buy-to-cover orders,” he stated.
Tesla shares rallied $48.70 to $349.54 a day following the manufacturer’s statement that it would produce its new Model 3 sedan at a profit, after several recent weeks in which output had stabilized.
The update buoyed hopes that the company headed by Elon Musk will check its losses.
Tesla’s rapid cash burn and hard time at turning a profit have made it a favorite target for shorts, consisting of big names such as Jim Chanos, head of Kynikos Associates, and hedge fund manager David Einhorn’s Greenlight Capital fund.