The stock market is currently heavily betting against Tesla ahead of the upcoming Model 3 unveiling later this month. The percentage of short interest on Tesla’s stock hit an all-time high of 27% this week despite the recent significant price per share decrease earlier in the year.
After several negative financial analyst notes early in 2016, Tesla’s stock took a serious tumble, but ever since Tesla reported its Q4 financial results and CEO Elon Musk confirmed the Model 3 unveiling, the stock has been on a uptrend (see chart below).
But with the price per share increase, investors are not all convinced and several are betting against it with short interest now bigger than Elon Musk’s stake in the company, which he recently increased to 28,903,342 shares after exercising over $200 million in stock options in the last two months.
Here’s a side by side of short interest and price per share:
Musk and Tesla have a rich history with short sellers. During an interview with FOX in September 2012, Musk warned that anyone holding a stock position against Tesla Motors will have a “tsunami of hurt” coming for them. During the 12 following months, Tesla’s stock price increased by 461%.
Tesla’s most important share price increases have often been linked to short sellers covering their positions after a catalyst pushed the stock higher. Most notably, after the company reported its first profitable quarter in 2013.
The most important upcoming catalyst is undoubtedly the unveiling of the Model 3, Tesla’s first mass market vehicle, which is set for March 31st in Los Angeles.
During the conference call discussing Q4 2015 financial results last month, Elon Musk said when talking about the unveiling:
“We’re trying to decide whether we should show all the cards or keep a few cards close to the vest. We haven’t made a decision yet.”
It’s safe to assume that for investors and short sellers, a lot will depend on that decision and if the vehicle manages to impress the industry, and more importantly, potential buyers.
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Good article. You should change the chart on the right to match the timeframe of the chart on the left. You don’t see as much correlation as you would if you had the same time frame for both charts.
Yeah you are right, but I wanted for people to be able to see that the uptake matches Q4 earnings/Model 3 event confirmation.
Here’s the best chart for correlation between short interest and PPS: http://i.imgur.com/Z8CUUaL.png
Good article. I think you need to change the time frame of the chart on the right to match the chart on the left. Bigger correlation that could be visible with similar time frames.
The last short numbers were reported as of 2/12, when the price was in the 140’s to 15’s. It’s now in the 190’s. I’d suspect there’s a decent chance short interest is currently lower, but these numbers are only reported every 2 weeks.
Perfect storm conditions for a short squeeze. I dare to predict $250 levels at month end.
Hope the short sellers get crushed.
Well, the short sellers are now paying me 4% to lend my shares out. No complaints!