Short sellers hold their positions despite Tesla surge
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Short sellers hold their positions despite Tesla surge 27 July 2020New York Reporter: Natalie Turner
Image: Tesla
Tesla鈥檚 share price surged in the run-up to its Q2 earnings amid speculation the company was about to be included in the S&P 500.
This prompted a large number of short sellers to exit their position at a loss, driving demand to borrow to record lows.
However, Ortex analysis has found a small number of short sellers are stubbornly holding their positions despite the surge in Tesla's share price.
The Ortex platform shows 11.3 million Tesla shares are still held in short positions.
Speculation about the impact of inclusion in the S&P 500 may be overstated, creating an opportunity for short sellers to take advantage of a "hype premium", says Peter Hillerberg, co-founder of Ortex Analytics.
鈥淚t is highly likely that what we鈥檝e seen over recent weeks is at least in part a 鈥渟hort squeeze鈥� whereby the Tesla share price has been pushed higher by short sellers closing their positions," he says.
鈥淔or high-conviction short sellers, this will just have been a further signal to hold tight and wait for an opportunity to take profit.鈥�
In a note published before Tesla鈥檚 Q2 earnings announcement, Ortex estimated that Tesla鈥檚 inclusion into the S&P 500 could equate to around $40 billion of buy orders.
However, it also pointed out that these orders would represent a 鈥渕odest鈥� three days of trading volume and that speculative buying was likely to be more significant than the index inclusion itself.
Hillerberg adds: 鈥淎 surge in speculative buying could be a signal for new short sellers to take a position and seek to take advantage of the hype premium which has characterised so much of Tesla鈥檚 price movement in recent years.
鈥淚t remains to be seen whether the short sellers that have maintained their position will benefit from their resilience, but whichever way you look at it, the battle of wits between Tesla and its short sellers is far from over.鈥�
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Image: Tesla 