Tesla’s stock price had one of its biggest surges in a long time following its second quarter earnings.

People betting against the company have now taken a paper loss worth almost $2 billion. Could it be Elon Musk’s predicted ‘next level burn’?

Back in June, Musk said that Tesla shorts have ‘about 3 weeks before their position explodes’.

The timeline matched Tesla’s release of its production and delivery numbers for the second quarter, but that wasn’t enough to initiate the short squeeze that Musk predicted.

But with the release of the financial results this week, Tesla’s stock surged 16% as the market was more impressed by the result and more convinced by Tesla’s prediction that it will be cash flow positive during the second half of the year.

At the last report, over 35 million Tesla shares were shorted, which is worth over $12 billion. The price increase resulted in a potential loss of almost $2 billion for shorts.

Yesterday, Ihor Dusaniwsky, managing director of S3, a financial technology and analytics firm that has been tracking the short position on Tesla, said that most shorts seem to be holding on:

“We are not seeing a large amount of buy to covers yet, with such a large price move on the open most short sellers that are looking to cover are waiting for a retracement before placing buy-to-cover orders. They’ve already been bloodied on the open without the ability to get out of their positions at anywhere near yesterday’s market close so they are waiting to see if they can make back a few bucks before realizing their losses.”

It would mean that a short squeeze is not in full swing yet, but it could potentially be the start and shorts are certainly being burned on paper.

Electrek’s Take

I enjoyed seeing Tesla’s stock gain value because I think it’s important for the electric vehicle revolution that Tesla, the only major global solely all-electric car manufacturer, proves itself to be financially viable.

But secretly, I think I enjoy it more for seeing the shorts scramble after a big day like Tesla had Wednesday.

They so often push misinformation and attack anyone saying anything that could even remotely be perceived as positive on Tesla. And then when something undoubtedly positive happens that disproves their misinformation, they kind of go nuts and it’s fun to watch.

Michael March encapsulated the whole thing beautifully in this very funny video that I can’t recommend enough:

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