Tesla short sellers reap €2.5bn in tumbling market

Investors betting against Tesla stock have reaped a $2.8 billion (€2.5 billion) paper gain as the US stock market has suffered its swiftest fall since the financial crisis.

The carmaker is a popular target for short sellers, who hold a collective $12 billion in short interest against its shares. These investors profit when the stock falls in value, and had faced steep losses as Tesla’s share price had climbed to record highs in recent months.

However, the stock has recently fallen sharply amid the broader US market sell-off driven by concerns the coronavirus would weaken the economy. The stock has lost 19 per cent of its value since reaching a high point in mid-February. This has shaved losses on the short positions, which now stand at $7.8 billion for the year, according to data from S3 Partners.

The large holding of short bets against Tesla combined with the steep drop in share price mean the short holdings have gained in total dollar value more than short bets against any other US listed group.

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"Over the last week they've made back a little more than a quarter of their losses from the year," said Ihor Dusaniwsky, managing director of predictive analytics for S3 Partners. "It looks like finally a lot of short sellers are taking this price pull back to get out of this trade." – Copyright The Financial Times Limited 2020