Tesla short-seller Jim Chanos changes his tune

Being short Tesla has 'been painful'

Short-seller Jim Chanos has trimmed his bets against Tesla in a rare reversal.

TickerSecurityLastChangeChange %
TSLATESLA INC.682.22-59.80-8.06%

On Thursday, the founder of Kynikos Associates told Bloomberg News, being short the stock has “been painful" as shares near the $600 level.

The electric carmaker, which competes against old-line automakers like Ford, General Motors and Fiat Chrysler, had struggled in the past couple of years to turn a consistent profit and reach founder Elon Musk's ambitious production goals for the Model 3. That left some investors, like Chanos, skeptical that it could maintain its market value, much less increase it.

Musk, however, has proved his skeptics wrong as Tesla has turned a profit in five consecutive quarters, paving the way for the company’s addition into the S&P 500 later this month which has accelerated the stock gains in recent weeks. Tesla’s market capitalization has soared to $556 billion, more than four times the size of Ford, GM and Fiat Chrysler combined.

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Photo by Patrick Pleul/picture alliance via Getty Images

Chanos first laid out his bearish case for Tesla in Oct. 2013 but did not go on the record as being short the stock until May 2016. Shares were up 1,178% through Wednesday since Chanos first declared he was short.

As recently as April, Chanos said his fund had a “maximum short” position, which under his firm’s rule is no more than 5% of capital.

FOX Business’ request for comment from Kynikos Associates went unanswered.

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Other short-sellers have joined Chanos in scaling down their bets against Tesla likely giving Musk some vindication. For years, he has publically criticized these doubters.

Short interest has declined by 63% this year to 48.12 million shares, or 6.35% of those available for trading, according to Ihor Dusaniwsky, managing director of predictive analytics at financial analytics firm S3 Partners. Still, investors have a $27.37 billion bet against the stock.

“TSLA shorts have been in the grips of a short squeeze for all of 2020,” he said, noting that those betting against the stock have suffered mark-to-market losses of $35.2 billion this year.

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He has however seen a slight increase in short interest as of late as traders bet on the possibility for a “near-term pullback that is common after a stock’s initial inclusion into the S&P 500" set for December 21.

Even so, Wall Street banks are growing more bullish on Tesla ahead of its addition to the benchmark index.

Goldman Sachs Group on Wednesday became the Street’s biggest Tesla bull, upgrading the company to a “buy” rating and raising its price target to $780 per share.

The firm cited faster-than-expected electric-vehicle adoption, falling battery costs, and government regulations moving in a favorable direction, as reasons for its improved outlook.

“We expect that Tesla’s integrated model will help sustain a leadership position in the EV market,” wrote Goldman Sachs analyst Mark Delaney.

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Elsewhere on Wall Street, Morgan Stanley analyst Adam Jonas and Wedbush Securities analyst Dan Ives last month raised their respective bull case price targets to $1,063 and $1,000, citing the strength of Tesla’s services business and growing global demand.

Tesla shares were up 580% this year through Wednesday, outperforming the S&P 500’s 14% gain.

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