To The Moon

Tesla Short Sellers Have Collected Nearly $14 Billion Since Elon Musk Agreed to Buy Twitter, Making Tesla the Most Profitable Short of 2022

Dow Jones

08:03

Tesla Motors

-0.78%

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Tesla shares drop below $125 for first time in more than two years as market cap slips below $400 billion, making car maker worth less than Visa and putting it in danger of falling out of top 10 most valuable S&P 500 companies.

Tesla Inc. shares plunged to a fifth consecutive daily decline Thursday, adding more to short sellers' returns from betting against the electric-vehicle maker.

Tesla $(TSLA)$ shares finished down 8.9% at $125.35 after dropping as much as 11% on volume of more than 200 million shares Tuesday, compared with a 52-week average daily volume of about 81 million shares. Tesla was the most active and worst performing stock on the S&P 500 index Thursday, and the most active and worst performing stock on the Nasdaq-100 , according to Dow Jones data.

While shares did not close under the psychological barrier of $125, Tesla still finished at its lowest price since September 2020. For the week, shares are down 16.6%, which would challenge the previous week for the worst since 2020. Tesla stock is on the road to its worst month, quarter and year on record.

The decline pushed Tesla's market capitalization lower than $400 billion, dropping it to 10th on the list of most valuable companies in the S&P 500. Visa Inc. (V) moved higher than Tesla on Tuesday, when Tesla trading put its valuation at $395.82 billion cap, below Visa's $418.17 billion. Walmart Inc. $(WMT)$ , at $383.35 billion, was sneaking up on Tesla with a chance to knock it out of the top 10.

Short sellers, whom Tesla Chief Executive Elon Musk has made a point of targeting previously, are having a happy holiday if they bet against Tesla this year, S3 Partners' Managing Director of Predictive Analytics Ihor Dusaniwsky said in a note. He pointed out that Tesla has been the most profitable stock to short in 2022.

"Short sellers have been backing up their TSLA short exposure for good reason, it is the most profitable short, in dollar value, of 2022," Dusaniwsky said. Tesla shorts are up $15 billion year-to-date in mark-to-market profits in 2022, with a gain of $4.54 billion in December alone, according to S3 data.

"Since Elon Musk's Twitter bid on 4/14/22, TSLA shorts are up $13.74 billion in mark-to-market profits," Dusaniwsky said.

The analyst said short interest in Tesla has been declining since April because of the price drop, but short selling has increased since August. With 3.05% of the stock's 81.8 million shares shorted, Tesla shares at $11.28 billion are the second largest short by dollar amount behind Apple Inc. $(AAPL)$ and its $16.78 billion in short interest.

For their part, Visa shares are also the fourth largest short by dollar value at $7.75 billion, according to S3 data.

Tesla shares were under pressure Thursday after the company doubled the discount it offers to customers who "take delivery of a new Model 3 or Model Y between December 21 and 31, 2022 for a $7,500 credit and 10,000 miles of free Supercharging," according to its website, raising concern that demand in the EVs is slipping. Tesla buyers are no longer eligible for a U.S. tax credit of up to $7,500 for purchasers of electric vehicles, but that incentive could return in 2023, which could be a disincentive to purchase a Tesla in the U.S. this year.

Tesla shares are down 64.4% for the year, while the S&P 500 has fallen 19.8% and the Nasdaq Composite Index is off by a third.