Investors who are betting that Tesla Inc. shares are poised for a fall were sitting on a more than $1 billion paper loss Thursday, after the stock rallied more than 12%[1] following its latest quarterly earnings.
Tesla short sellers were down more than $1.1 billion in mark-to-market losses on the 35.1 million Tesla shares that they have shorted, according to S3 Partners LLC, a company that has access to and tracks real-time short interest data. Short sellers take a view on a stock that it will fall in price. They then borrow the shares so they can sell them, hoping they can later scoop them up at a lower price, return them to the original lender and pocket the difference.
The Silicon Valley car maker reported mixed second-quarter results late Wednesday and Wall Street appeared to seize on the company’s renewed promises of profitability going forward.
Tesla TSLA, +14.49%[2] said it lost $718 million, or $4.22, in the quarter, compared with $336 million, or $2.04 a share, in the year-ago period. Adjusted for one-time items, Tesla lost $520 million, or $3.06 a share, compared with $220 million, or $1.33 a share, a year ago. Revenue rose to $4 billion from $2.77 billion a year ago.
Read more: Live Blog: Tesla earnings send stock higher[3]
Analysts polled by FactSet had expected an adjusted loss of $2.88 a share on sales of $3.99 billion.
Beyond the numbers, Chief Executive Elon Musk struck a more conciliatory tone with analysts on the earnings call and even apologized for his bad manners on the previous quarter’s earnings call.[4]
KeyBanc Capital Markets analyst Brad Erickson said Musk delivered “maybe the most valuable apology of all time.” That call, and a series of Twitter spats between Musk and his perceived detractors, had many questioning whether the executive was suited to the role of head of a public company.
Read: Tesla stock rallies after ‘most valuable apology of all time,’ but profitability questions remain[5]
See also: Elon Musk seems to have learned a few lessons, but the big one remains[6]
Tesla is the most shorted stock in the U.S. market, according to S3. Before today’s stock move, the short sellers were up $276 million in 2018. They are now facing $831 million in year-to-date mark-to-market losses.
“We are not seeing a large amount of buy to covers yet, with such a large price move on the open most short sellers that are looking to cover are waiting for a retracement before placing buy-to-cover orders,” said Ihor Dusaniwsky, managing director, predictive analytics at S3. “They’ve already been bloodied on the...