Tesla Short Sellers Lose $3.5B After Deliveries Report

Tesla shares surged this week following a better-than-expected second-quarter deliveries report, causing significant losses for short sellers

Traders anticipating a decline in Tesla’s stock received unfavorable news this week when the electric vehicle manufacturer’s deliveries exceeded expectations.

According to data from S3 Partners, short sellers have suffered an estimated $3.5 billion in losses on a mark-to-market basis due to the 17% increase in the shares in the two trading days following the second-quarter report.

Tesla shares have surged by 73% since experiencing their lowest point of the year in April, resulting in a difficult few months for short sellers. In shortened trading on Wednesday, the stock closed at $246.39, just over $2 short of erasing its year-end loss.

Presently, Tesla’s short interest is at 3.5% of the float, which translates to 97 million shares that have been sold short, with a notional value of $22.4 billion.

On Tuesday, Tesla exceeded the 439,000 deliveries predicted by Wall Street, reporting 443,956 deliveries for the second quarter.

Deliveries experienced a 4.8% decrease from the previous year; however, the decline was less substantial than the 8.5% year-over-year decrease observed in the first quarter.

Although the delivery report indicated that demand for Tesla vehicles is higher than anticipated, it provided a restricted perspective on the company’s performance.

Tesla has been offering incentives, such as discounts and low- or no-interest financing options, to encourage the purchase of electric vehicles (EVs) for months, as its automotive business is experiencing a sales decline due to an aging lineup and heightened competition.

Tesla reduced prices in Germany and Norway during the second quarter and provided zero-interest loan promotions in China, including its entry-level Model 3 sedan and Model Y SUVs.

Tesla provided purchasers of its rear-wheel drive Model 3 with a three-year, 2% APR financing arrangement in the United States.

In the interim, Tesla’s most recent model, the angular steel Cybertruck, has experienced a sluggish start, resulting in four voluntary recalls in the United States within the past year due to quality issues.

Tesla’s earnings report, scheduled for release later this month, will offer a more comprehensive assessment of the organization’s financial status. According to LSEG, analysts anticipate a 2.9% decrease in revenue to $24.2 billion, which follows a 9% decline in the first quarter.

In a note to clients on Wednesday, Ronald Jewsikow, an analyst at Guggenheim Partners, stated, “Clearly, the financing promotions on both the Model Y and Model 3 drove considerable volume growth.

However, as we have observed with other sizable price cuts and discounts, demand is pulled forward, and new demand must be created in 3Q and beyond, which has proven challenging over the last 18 months.” He assigns the stock a sell rating.

Tesla CEO Elon Musk, whose net worth has increased by approximately $15 billion in the past two days, expressed his satisfaction with the decline that short sellers are experiencing.

This encompassed a personal attack on Bill Gates, the co-founder of Microsoft, who has a history of shorting the stock and engaging in disputes with Musk.

Musk stated in a post on X that “anyone still holding a short position will be obliterated” once Tesla has thoroughly resolved the issue of autonomy and has Optimus in volume production. “Even Gates.”

Tesla’s humanoid automaton, Optimus, is currently under development.

Musk asserted that Tesla would eventually become a corporation valued at tens of trillions of dollars due to these robots. Tesla’s market capitalization is presently less than $800 billion.

In the interim, Tesla continues to face obstacles in its core automotive business.

The company consistently implements enhancements to its in-vehicle software, and a recent update is expected to integrate YouTube, Amazon Music, and weather and air quality applications into the infotainment systems of drivers.

However, Tesla has yet to provide software to transform its current vehicles into autonomous vehicles.

A recent Axios-Harris poll revealed that the company is experiencing a decline in brand recognition, which is at least partially attributable to Musk’s “antics” and “political rants.”

This week, a survey conducted by the New York Times also indicated that Musk’s “polarizing statements” and “political activity” are alienating specific “left-leaning consumers.”

Musk has advocated for a “red wave” in the forthcoming U.S. elections and has stated that he and former President Donald Trump communicate frequently.

Additionally, he has shared, liked, and promoted far-right accounts and content on X.

In contrast, Pew Research and Gallup conducted research last year that indicated that advocates of electric vehicles were inclined toward the left.