Here’s something sure to make Elon Musk smile – short sellers, those investors who placed bets that the value of Tesla shares were going to go down, lost a combined $12.2 billion last year, more than short sellers lost on any other company in 2023.
That estimate, from markets analytics firm S3 Partners, isn’t a shock – Tesla shares slightly more than doubled during the course of the year. But for the shorts to take that kind of hit, there needs to be not only gains for the shares, but also a large group betting the other way.
With US stock indexes ending the year near record highs – the S&P 500 rose 22% for the year – shorts had a bad year overall. S3 estimates overall short losses reached $194.8 billion. But the losses by those shorting Tesla were particularly bad – more than the losses they suffered at Microsoft and Faceboook owner Meta, combined.
And Tesla, which is worth far more than any other automaker in the world – despite having sales that are a fraction of many established automakers – has long been a top target for shorts who believe the shares are overvauled. Last year, investors had an average short interest of $18.9 billion on Tesla shares, surpassed only by Apple, which has an average of $19 billion in short interest with a much larger market value than Tesla.
To put the $12.2 billion in losses in context, the 6-plus week strike by the United Auto Workers union against General Motors, Ford and Stellantis cost the US economy as a whole a total of just over $10 billion, according to an estimate from Anderson Consulting Group, a Michigan think tank that tracks the cost of strikes.
The losses by short sellers are a stark contrast to a year ago, when shorts made a $15.9 billion profit on Tesla shares as the company’s stock lost 65% of the value. But Tesla shares have been going up far more often then down since it went public in 2010. Since its shares started trading publicly, shorts have suffered a net loss of $61.8 billion, according to S3.
“That going to leave a mark,” joked Ihor Dusaniwsky, managing director at S3, in an interview with CNN.
Those shorting Tesla did even worse in the first half of the year than they did for the year as a whole, closing out $13 billion in losing short positions from January-June, but then making a $771 million profit in the final six months as Tesla shares lost about 15% of their value from their high in July through the end of the year.
A legacy automaker, or a disruptive tech titan?
Even with that more recent decline, Tesla has a market capitalization of $756 billion, more than twice the value of the second most valuable automaker, Toyota. That’s despite the fact that Toyota’s global sales are more than six times greater than Tesla’s. Dusaniwsky and some analysts bullish on Tesla shares say that short sellers are waiting for Tesla to start trading far below its current valuation.
“Every year the bears come out of hibernation mode and think ‘This is the year that Tesla shares collapse,” said Dan Ives, analyst with Wedbush Securities. “The bears view it as an automobile company that should trade at a valuation a multiple of GM or Toyota. The bulls such as myself believe it’s a disruptive technology company. And that’s the Wall Street consensus view.”