Short Selling Tesla Shares Causes Traders to Lose $7.6 Billion

Tesla stock has skyrocketed 70% in the past month, crushing short sellers who bet against it. Hedge funds that traded against Tesla lost $7.6 billion over the past 30 days, making it the least profitable short of the year so far.

In share investing, short selling an asset involves buying it in such a way that the investor will profit if the asset drops. Tesla’s stock price has been on the rise since it slashed prices and Chief Executive Elon Musk doubled down on ambitious growth targets

The recent surge in Tesla stock has wiped out about half of the gains short sellers made last year betting against the company. At the end of December, short sellers had made a $15 billion profit in 2022, making Tesla the most profitable short of the year.

Shares of the automaker have been unsteady after a weak fourth-quarter delivery result. However, on the firm’s most recent earnings call, Musk reiterated the company's long-term growth target of 50%. 

Investors are keenly awaiting Tesla’s upcoming investor analyst day, during which Musk will announce the company's “Master Plan 3” that will detail the company's medium-term priorities.

Whether Tesla can continue to maintain its strong momentum throughout the remainder of 2023 remains to be seen, as the stock is already down 10% from its high of Thursday of last week.  What remains is that the stock will continue to swing in both directions, making the brand a battleground stock between bulls and bears.