Tesla Short Interest Surges

Douglas A. McIntyre

Short bets against Tesla Inc. (NASDAQ: TSLA) rose 20% in the period that ended April 13, based on the number of shares shorted. About 30% of Tesla’s shares were sold short. The data come at a time when Tesla is struggling with production issues, safety concerns and worries about its financial health.

The short interest in Tesla rose nearly 21% to 38.3 million. It is the 16th largest short position of all shares traded on the Nasdaq.

Short sellers have reason to believe Tesla’s shares could go lower. Recent short sellers have been rewarded with a recent drop as well. Tesla’s shares are down 16% in the past three months to $283.

Tesla has had such significant problems with its Model 3 that CEO Elon Musk says he has slept on the factory floor to help supervise production. The inexpensive Model 3, with a price of about $35,000, is the key to Tesla becoming a mass-market car company. At one point, 400,000 people had deposits to buy the car. Production has been far enough behind that investors worry the car will not be available in enough numbers soon to positively affect Tesla’s revenue. Tesla also faces accusations that its production line has safety issues.

Tesla also has had to ward off worries that its cars, once considered ultra-safe, may be prone to accidents when they are in a partial self-driving mode. A fatal accident occurred in March when the driver had the “autopilot” feature on. Tesla said the driver ignored the system’s crash warning. The accident has set up a war of words between Tesla and the National Transportation Safety Board. The dispute could make it harder for Tesla to participate in any investigation.

Musk recently said Tesla will make money in 2018. That statement faces a number of skeptics. Among the reasons are the delay in the Model 3 and Tesla’s problems with suppliers. Some investors believe it is obvious Tesla will need to raise money. Musk says otherwise.

Tesla is in a precarious enough position due to all these problems that one misstep could make short sellers a great deal of money.