Following Tesla’s (TSLA) acquisition offer to SolarCity (SCTY) last week, the automaker’s stock price fell sharply, but while the market tumbled after the United Kingdom voted to leave the European Union the next day, the stocks of both companies outperform the market – indicating some resistance.
Now we learn that Wall Street is betting big against the companies as short interest is close to all time high and short sellers are out of shares to borrow.
Reuters talked with Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners, about short interest on Tesla’s and SolarCity’s stocks:
“There is not much stock left to borrow and what is left is going out the door at premium levels with borrow rates of 45 percent to 75 percent fee today. There is virtually no stock left to borrow in SCTY which is reflected in the 100-percent-plus borrow cost of any scraps that have been traded today.”
Dusaniwsky also added on SolarCity:
“SolarCity short sellers may not be digging into their wallets as deep as Tesla short sellers, but are still paying (collectively) over $1 million a day to keep their shorts on their books.”
The short interest on Tesla right now is worth $7.3 billion, up 16 percent in June and now close to its high of $7.4 billion in March.
Tesla has a long history with shorts and has often been the most shorted stock on the NASDAQ. Short squeezes, when shorts exit en masse, have also been part of Tesla’s most impressive stock price increases. In 2012, Elon Musk warned that anyone holding a stock position against the company will have a “tsunami of hurt” coming for them. During the 12 following months, Tesla’s stock price increased by 461%, a lot of which was attributed to a short squeeze after Tesla reported its first quarterly profit in Q1 2013.
More recently, Musk again commented on people holding a short position on Tesla’s stock saying that it would be “probably unwise.”