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A Tesla Short Squeeze Is ‘Off The Table’

David Einhorn’s Greenlight Capital said the firm’s short bet against Tesla was a “significant” winner in the second quarter, according to a letter to investors.

Elon Musk’s Tesla is giving short sellers a lift. 

The plunge in the electric-car company’s shares on Thursday drove short sellers’ profits this year to about $3.06 billion, a mark-to-market increase of about 35 percent for 2019, according to a research note from Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Dusaniwsky calculated the gains based on Tesla’s stock decline of about 14 percent during mid-day trading Thursday. The carmaker’s shares were trading at $228.35 at 2:15 pm in New York, down 13.8 percent from their close on July 24, according to Nasdaq data.

“This price move has taken the idea of an impending Tesla short squeeze totally off the table,” Dusaniwsky said in his note. “Shorts now have a $3 billion buffer of year-to-date mark-to-market profits to comfort them and help keep them in their positions.”

David Einhorn’s Greenlight Capital is among the hedge funds betting against Tesla, founded by chief executive offer Musk in 2003. In its second-quarter letter to investors, Greenlight pointed to its Tesla short as one of five “significant” winners.

Tesla announced its second-quarter results after markets closed July 24, disclosing a $1.12 loss per share that was wider than expected, according to S3 Partners. The financial technology and data company pegs short interest in Tesla at $10.6 billion, or about 30.35 percent of its float, or outstanding publicly traded shares.

“Tesla continues to be the most shorted U.S. equity, in terms of notional short interest, as well as the most shorted stock in the worldwide automotive sector,” Dusaniwsky said in his note. “Another negative announcement was the resignation of its founding engineer and CTO, J.B. Straubel, after 16 years of service at the company.”

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Tesla’s press desk did not immediately reply to an email seeking comment. 

Short interest in Japan’s Toyota Motor Corp., the second-most-bet-against car company, measured at about $1.6 billion, according to S3. That represents about 1 percent of Toyota’s share float. 

While the volume of Tesla shares shorted has risen this year by 14.4 million, or 56.3 percent, S3 data show some short sellers have closed out their positions, possibly to realize profits.

“There has been some short covering recently,” Dusaniwsky said. “Short sellers were trimming their exposure ahead of the earnings report.”

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