Tesla short-sellers reap $17B windfall during company’s worst year ever

Tesla’s unprecedented stock struggles during CEO Elon Musk’s Twitter takeover have been a major boon to the automaker many short sellers, according to market data published Thursday.

Investors who bet against Tesla’s stock are set to earn a whopping $17 billion in mark-to-market profits this year, Bloomberg reported, citing data from analytics firm S3 Partners Research. Tesla ranked as the most lucrative short bet over the last 12 months.

The boost to short-sellers occurred as Tesla tracked for its worst year of market performance on record. As of Thursday’s closing price of $121.82, Tesla shares were down 69% on the year.

S3 Partners’ Ihor Dusaniwsky told the outlet that the windfall came after several years of major losses for short-sellers during Tesla’s pandemic-era stock boom.

“When Tesla’s stock begins to tick upwards, there should be a flurry of short covering which will help boost its stock price higher and quicker as shorter-term short sellers look to realize their outsized mark-to-market profits before they evaporate,” Dusaniwsky said.

The decline included an 11% plunge on Tuesday alone after the Wall Street Journal reported that a surge in COVID cases had forced Tesla to temporarily halt production in Shanghai.

Musk sought to assuage concerns among Tesla employees this week. In a memo to staffers Wednesday, the billionaire thanked workers for their “exceptional execution” throughout the year while downplaying the company’s dismal stock performance.

“Don’t be too bothered by stock market craziness,” Musk said in the memo obtained by CNBC. “As we demonstrate continued excellent performance, the market will recognize that.”

“Long-term, I believe very much that Tesla will be the most valuable company on Earth!” Musk added.

Tesla investors have grown frustrated with Musk as he has devoted more of his time to revamp Twitter since his $44 billion takeover of the social media site in October.

Critics say Musk’s controversial actions at Twitter — which have included sweeping layoffs, clashes with advertisers and an overhaul of the platform’s verification process — have become an overhang on Tesla’s stock. Musk has also roiled investors by selling massive tranches of Tesla stock – including at least $36 billion to fund his acquisition of Twitter.

The ongoing Twitter drama added to existing challenges at Tesla, which has contended with lingering global supply chain issues, diminished demand in China and mounting fears of a global recession.

Earlier this month, Electrek reported that Tesla would conduct an unspecified number of layoffs and implement a hiring freeze in the first quarter of 2023. Musk had previously signaled in June that he wanted to cut 10% of corporate staffers due to a “super bad feeling” about the state of the economy.