Date
18 August 2018
Tesla shares spiked on Thursday after the company signaled that its cash-burn was being brought under control. The stock surge left short-sellers with huge paper losses. Photo: Reuters
Tesla shares spiked on Thursday after the company signaled that its cash-burn was being brought under control. The stock surge left short-sellers with huge paper losses. Photo: Reuters

Tesla short-sellers dealt a US$1.7 bln loss as shares soar 16%

Tesla stock short-sellers are estimated to have suffered US$1.7 billion in paper losses on Thursday as shares of the electric-car maker soared more than 16 percent after the firm’s quarterly report, Reuters reports. 

Tesla shares posted their biggest gain in more than four years, a day after the company said it will produce its new Model 3 sedan at a profit, following several recent weeks in which output had stabilized.

The update buoyed hopes that the company led by Elon Musk will stanch its losses.

On Thursday, Tesla stock finished up 16.2 percent at US$349.54, dealing investors who had been betting against the firm huge losses.

According to financial analytics firm S3 Partners, short-sellers were slammed with US$1.7 billion in paper losses on the day, Reuters said.

Until Wednesday, Tesla short-sellers had, on paper, been up US$276 million for the year. Following Thursday’s stock surge, they now have losses of US$1.4 billion for the year, as per S3 data. 

Tesla’s rapid cash burn and struggles at turning a profit have made it a favorite target for shorts, including big names such as Jim Chanos, head of Kynikos Associates, and billionaire hedge fund manager David Einhorn’s Greenlight Capital fund.

But a sharp rally in the electric car maker’s shares since early April has hurt short-sellers, the report noted.

On Tuesday, Einhorn told investors that his bet against the stock had turned into heavy second-quarter losses at his Greenlight Capital fund.

Since the beginning of 2016, Tesla is said to have been the fourth-worst performing US short bet.

Short-sellers have lost US$4.7 billion on a net basis over that period, according to S3 data.

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