Tesla Takes a Major Fall This Year!

With Tesla CEO Elon Musk is dealing with issues over at his newly acquired company Twitter, the car manufacturer is suffering major losses.

This was, of course, welcomed by the investors who spent years betting against the company, despite its stinging losses for what seemed like years on end.

Tesla stock tumbles towards its biggest drop to date

However, this time, the Tesla stock is headed towards its worst slump ever since it was first listed; the short sellers have managed to reap over $17 billion in market profits.

In fact, experts believe that the slump made Tesla stock the most profitable short trade in 2022, at least according to data from S3 Partners.

Only this month, the stock has managed to drop by over 37%, adding up to a 65% decline in this fiscal year and effectively wiping out more than $670 billion of market value it had.

This is a massive change for a stock that came out of the pandemic as a winner, as it surged by over 740% in 2020 when demand was through the roof and interest rates were still decently low.

This year was a sight to behold for the short traders, which held more than a third of the company’s stock in free float back in 2018, to no avail.

Among those that raked in huge amounts of money were high-end investors like David Einhorn, Jim Chanos, and Andrew Left.

A sign of relief

Of course, this didn’t sit well with Musk and his giant ego. He decided to clap back at the shorts by selling limited edition merch, that being the satin shorts which went for the measly price of $69,420.

As the rally came to a close, the short traders had little to no time to evaluate their bets, and now, only 2.9% of the Tesla free float is held short.

S3 Partners’ expert Ihor Dusaniwsky believes the short sales will continue until the stock bottoms out, but the market analysts are still struggling to find one, especially considering Tesla is offering a lot of incentives for buyers.

The company shares closed on Thursday with an 8.1% gain, marking the second day of an upward trend, which followed a full week of losses that dragged the stock down by over 30%.

However, even if the shares do start recovering from this point on, the company’s innate volatility will still make it a risk for investors.

Dusaniwsky explained there should be a surge in short covering as the short sellers realize their mark-to-market profits have been outsized, leading to a boost in the stock’s price faster than ever before.

However, it’s been proven time and time again that Tesla investors are mostly emotional buyers and they’re likely what’ll get the company back on its feet.

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