This week the Dow Jones Index Committee announced that Tesla Inc (TSLA) will be added to the S&P 500 prior to the open on December 21, 2010. Tesla’s stock price has rallied since the announcement, gaining +21% as of mid-morning trading. As a result of this surge in its stock price TSLA equity short sellers are down -$4 billion in mark-to-market net-of-financing losses in under four days. TSLA shorts are now down -$30.34 in year-to-date mark-to-market net-of-financing losses and down -$5.03 billion for the month of November.
TSLA short interest is $22.03 billion; 45.26 million shares shorted; 5.97% Short Interest % of Float; 5.63% S3 Short Interest % Float (which includes synthetic longs created by short selling) and 0.30% stock borrow fee. TSLA is not only the largest short in the U.S. but also the largest worldwide short nearly doubling Alibaba (BABA) in second place.
As expected, TSLA is also the largest short in the Auto Manufacturers, Construction Machinery, and Heavy Trucks sectors. More interestingly, the top three shorts in the sectors are Electric Vehicle\Alternative Energy vehicle manufacturers. Tesla Inc, NIO Inc (NIO) and Nikola Corp (NKLA) are the top three shorts in the sector and make up nearly three-quarters, 74%, of all the short selling in these sectors. Recent short selling and short covering activity shows us a short selling rotation among these three stocks, with new short covering in TSLA versus new short selling in NIO and NKLA.
Over the last 30 days TSLA shorts we have seen total shares shored decline by -6.8 million shares, worth -$3.33 billion, a -13% decline in shares shorted as TSLA’s stock price rose +13%. Over the past 7 days there has been continued short covering, partially as a response to the S&P announcement, with shares shorted declining by 450 thousand shares, worth $238 million, a -1% overall decline as TSLA’s stock price spiked +17%.
We should expect continued short covering in TSLA, with the year-long short squeeze tightening even more once indexed long buyers are forced to add TSLA shares to their portfolios by December 21st. As the S&P 500 based fund and ETF portfolio managers buy TSLA shares we should see upward price pressure on the TSLA’s stock price and a resulting increase in mark-to-market losses for TSLA short sellers. These added losses will force some existing shorts to trim their positions, and maybe, and more importantly, the fear of an impending long buying spree may scare off new short sellers from initiating new short positions. The exit of older TSLA shorts not being replaced by new TSLA shorts may produce a dramatic drop in total TSLA shares shorted in the month of December.
The S&P 500 Index Committee may have given out some early Christmas presents to TSLA investors, sugar plums to TSLA longs and coal to TSLA shorts.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
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