Tesla short sellers lose $3.5 billion in two days after second-quarter deliveries

Tesla The better-than-expected shipments report this week was bad news for traders who were betting on a decline in the electric vehicle maker’s stock.

With the stock up 17% in the two trading days since the second-quarter report, short sellers have lost about $3.5 billion on a mark-to-market basis, according to data from S3 Partners.

It’s been a painful few months for short sellers, as Tesla shares are up 73% since their close for the year in April. After closing at $246.39 in shortened trading on Wednesday, the stock is just over $2 shy of erasing its loss for the year.

Short interest in Tesla currently stands at 3.5% of the float, or 97 million shares shorted, with a notional value of $22.4 billion.

Tesla reported second-quarter deliveries on Tuesday of 443,956, beating Wall Street estimates of 439,000. Shipments fell 4.8% from a year earlier, but the decline was not as large as the 8.5% year-over-year drop in the first quarter.

While the shipments report suggested that demand for Tesla vehicles remains stronger than expected, it offered a limited view of the company’s performance.

With its auto business mired in declining sales due to an aging lineup and tougher-than-ever competition, Tesla has been incentivizing electric vehicle purchases for months with discounts, low-interest or no-interest financing options and other benefits.

In the second quarter, for example, Tesla cut prices in Germany and Norway and offered zero-interest loan promotions in China, even for its entry-level Model 3 sedan and Model Y SUV. In the US, Tesla offered a three-year, 2% financing deal in April to buyers of its rear-wheel-drive Model 3.

Meanwhile, Tesla’s newest model, the angular steel Cybertruck, has gotten off to a slow start, with quality issues prompting four voluntary recalls in the US in less than a year.

Tesla’s earnings report later this month will provide a clearer picture of the company’s financial health. Analysts expect to see revenue fall 2.9% to $24.2 billion, according to LSEG, after a 9% drop in the first quarter.

“It’s clear that the financing promotions for both the Model Y and Model 3 led to a significant increase in volume, but as we’ve seen with other significant price cuts and discounts, demand has been pulled forward and new demand should to be created in the third quarter and beyond, which has proved challenging. over the past 18 months,” Ronald Jewsikow, an analyst at Guggenheim Partners, wrote in a note to clients on Wednesday. He has a sell rating on the stock.

Tesla CEO Elon Musk, whose net worth has risen by about $15 billion in the past two days, celebrated the hit short sellers are taking. That included a personal attack on Microsoft co-founder Bill Gates, who has a history of shorting his stock and working with Musk.

“Once Tesla fully resolves autonomy and has Optimus in volume production, anyone still holding a short position will be gone,” Musk wrote in a post on X. “Even Gates.”

Optimus is Tesla’s humanoid robot currently in development. Musk has claimed that these robots will one day turn Tesla into a company worth tens of trillions of dollars. Tesla’s market cap is currently under $800 billion.

Meanwhile, Tesla’s challenges in its core automotive business remain.

The company regularly releases upgrades to its in-vehicle software, and a new update promises to bring YouTube, Amazon Music, and weather and air quality apps to drivers’ infotainment systems. But Tesla has yet to offer software that can turn its existing cars into self-driving vehicles.

Further, a recent Axios-Harris survey found that the company is experiencing a brand deterioration that is at least in part due to Musk’s “flattery” and “political deals.” A New York Times poll this week also said Musk’s “polarizing statements” and “political activism” are alienating some “left-leaning consumers.”

Musk has called for a “red wave” in the upcoming US election and has said he and former President Donald Trump speak often. He has also shared, liked and promoted far-right accounts and content on X. Electric vehicle advocates, by contrast, tend to are politically left-leaning, according to surveys by Pew Research and Gallup last year.

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