Traders who bet against the stock are licking wounds inflicted by Tesla shares rallying 53 percent since the electric-car maker reported a surprise third-quarter profit on Oct. 23. Counting Wednesday’s paper losses of $300 million, short-sellers have lost $2 billion this year, according to data from the financial-analytics firm S3 Partners.
“You’re seeing a lot of the bears going into hibernation mode on Tesla because you can’t fight in terms of what the demand looks like, especially in Europe,” Dan Ives, equity research managing director at Wedbush Securities, told FOX Business’ Stuart Varney.
Whether Tesla is a $500 stock or $250 stock depends on its success in China, which all comes down to its new Gigafactory in Shanghai, Ives believes.
“That’s going to be the next phase of growth -- and that’s why right now, for Tesla, the big focus is China and Europe, and right now, that’s the one-two punch,” Ives said. “You’re going to continue to see that stock move higher.”
That would mean more pain for short-sellers, who were short 25.26 million shares, with a notional value of $9.57 billion, or 18.88 percent of shares outstanding, according to S3 data on Tuesday, Dec. 17. Short-sellers make money by borrowing shares they believe will decline in value, selling them at the current price and then buying them back at a lower one to return to the owner.
When prices don't fall, however, they have to buy the shares back at a higher cost.
Tesla shares have climbed about 17 percent this year while the S&P 500 has risen by 27.5 percent.