In the financial world, Tesla has garnered attention as the stock most favored by short sellers, according to a recent study by Hazeltree. Short sellers speculate on a stock’s decline, hoping to profit from borrowing and selling shares, with the expectation of buying them back at a lower price. Tesla’s journey has been marked by significant interest from short sellers, including prominent figures like David Einhorn and Jim Chanos.
From Rags to Riches and Back?
Tesla’s stock experienced a remarkable ascent from 2019 to 2022, rewarding early investors with exponential gains. This growth was fueled by the company’s success in the automotive sector, its robust energy division, and advancements in AI technology. However, many short sellers suffered substantial losses during this period and subsequently retreated from their positions.
A Shifting Focus Causes Concern
Despite past success, Tesla shares have not been immune to decline. The company has faced increasing competition and skepticism over CEO Elon Musk’s dedication, particularly after his acquisition of Twitter. While some investors question Musk’s allocation of focus, Tesla’s stock has still yielded an impressive 800% increase over the past five years, albeit with a recent 35% dip over the last two.
Tesla’s stock, once a darling of growth investors, may now be regaining appeal among short sellers. Hazeltree’s January report has placed Tesla at the forefront of large-cap stocks with high short interest, indicating a crowded market for short positions. The company holds a “crowdedness score” of 99, the highest on Hazeltree’s scale, and a 2.12 percent institutional supply utilization rate.
This score illustrates the number of funds engaging in short-selling of a particular stock within Hazeltree’s network. It measures the intensity of short interest in a security, with a higher score indicating stronger consensus among funds to short the stock. Tesla briefly lost its position as the most crowded security to ExxonMobil in October, but has since reclaimed its top spot, with ExxonMobil and Chevron following behind.
Tesla’s prominence in short-selling discussions showcases the dynamic and often volatile nature of stock market investments. While the company has witnessed a period of significant growth, current trends suggest that the sentiment among short sellers is shifting, potentially signaling new challenges and opportunities for Tesla and its investors.
