Tesla Short Sellers Sitting on $14 Billion Bomb That’s Ready to ‘Explode’

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As of the end of May, short sellers held nearly 31% of the outstanding float of Tesla Inc. (NASDAQ: TSLA), a total of just over 39 million shares. That is a virtual tie with the highest level of short interest in Tesla in the prior 12 months.

At Friday’s closing price of about $358 per share, short sellers have bet around $14 billion that Tesla’s share price will fall. Over the past 12 months, the stock is down 3%; for the year to date shares are up 11.7%, but the rise has been anything but smooth.

The all-electric carmaker’s troubles have been detailed almost endlessly as Tesla tries to make good on CEO Elon Musk’s promise that the company would be producing 5,000 Model 3 sedans a week by the end of this month. The company has even been reported to be using tents to house a Model 3 assembly line.

On Sunday, in a response to a tweet from Electrek editor Fred Lambert, Musk tweeted out this warning to Tesla’s short sellers:

That would indicate that Musk believes Tesla will hit its target of 5,000 Model 3s per week. If the company does (or even comes pretty close), short sellers will get slaughtered. And as they race to cover their short positions, the short squeeze would be what Musk called the “short burn of the century.”

Musk even put up $10 million of his own money to buy more Tesla shares last month, and he has been talking up the company’s prospects at a confidence level that is elevated even beyond his usually upbeat pronouncements. Over at Electrek, Lambert commented:

I think that him saying that “short positions will explode” in just a few weeks is either a really ballsy move or he knows something we don’t. I think it’s the latter.

Tesla shares traded up about 1.3% early Monday morning at $362.72 in a 52-week range of $244.59 to $389.61. The Nasdaq composite index is down about 0.6% in the first half-hour of trading.