Short Sellers Scored $900 Million in Profits on Tesla Stock Wednesday

For short sellers, falling share prices can mean big profits. Conversely, rising share prices can mean big losses. Just ask the hedge funds that got burned when GameStop shares put a massive squeeze on short sellers, forcing them to cover their bets and driving the stock to nosebleed levels.

At midday on Wednesday, electric vehicle (EV) short sellers were up a cool $1 billion in mark-to-market profits for just that one day. Of that total, more than $900 million flowed into the pockets of Tesla Inc. (NASDAQ: TSLA) short sellers. The second-largest total profit to short sellers came from Nio Ltd. (NYSE: NIO), which accounted for nearly $90 million of those profits.

The data was reported by S3 Partners, which also noted that the big losers were short sellers of Lordstown Motors Corp. (NASDAQ: RIDE), who were burned to the tune of more than $34 million. The total profit for the 15 companies S3 Partners tracked was just over $1 billion. Excluding Tesla, short sellers posted profits of $92.6 million.

Tesla is by far the largest short in the EV sector, according to S3 Partners, with 76% of the sector’s short interest. Short interest in EVs on Wednesday totaled $29.5 billion, down from $48.5 billion in short interest on January 1. Excluding Tesla, short interest in EVs currently stands at $7 billion, up by $61 million for the year.

Short sellers of Nikola Corp. (NASDAQ: NKLA) posted profits of more than $40 million on Wednesday. For the year to date, however, Nikola’s short sellers have lost nearly $104 million. Short sellers in every other company have made a profit in 2021.

As a percentage of the stock’s total float, short interest in Tesla has dropped from nearly 8% at the beginning of the year to just over 5% as of May 18. For the other stocks included in S3 Partners’ EV coverage, short interest as a percentage of total float has increased from 12.7% in January to just over 17% as of May 18.

Demand for short shares also drove up the borrow fees short sellers pay to accumulate their positions nearly doubled, from 4.35% in January to 8.64% in May. That change excludes borrowing fees for Tesla, which remained at 0.03% due primarily to the high availability of the stock to short sellers. The highest fee on May 18 was 113% to borrow shares of Arrival, a U.K.-based EV maker.

Here’s how S3 Partners sums up EV short interest:

[W]e are seeing active short selling in EV stocks, except for TSLA, and short side profitability in EV stocks, except for NKLA. Increased competition in the EV (electric vehicle) space is coming from the traditional ICE (internal combustion engine) manufacturers as more of their planned EV fleets hit the showrooms. We should see further short selling in these EV based stocks with every Ford F-150 Lightning, VW ID.4 SUV, Audi Q4 e-tron, GMC Hummer and Mercedes-Benz EQS that leaves the production line. Increased competition in the form of new models hitting the showrooms will dilute market share across the EV platform – which should lead to more short selling in some of these EV stocks.

Tesla stock was making something of a comeback Thursday, trading up about 3.4%, at $582.56 in a 52-week range of $157.00 to $900.40. The consensus price target on the stock is $663.97.

Nio shares traded up 2.1% to $34.17, in a 52-week range of $3.18 to $66.99. The consensus price target is $53.89.

Lordstown shares traded down nearly 13% to $10.00. The 52-week range is $6.69 to $31.80, and the consensus price target is $21.33. Wolfe Research downgraded the shares from Peer Perform to Underperform and slashed its price target from $18 to $1.

Nikola stock traded down about 3%, at $12.51 in a range of $9.37 to $93.99. The consensus price target is $18.17.