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.
To all Tesla haters & short sellers messaging, harassing me to sell shares. Not selling till 2030. Tesla has the greatest future & will be the largest company in 5 years. Getting back part time to my nursing profession (2 night/week) to raise $ for extra shares & RE full time. pic.twitter.com/i7ucGOmiOX
— Eva McMillan ♥️ (@EvasTeslaSPlaid) December 23, 2022
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.
Elon Musk knows that he will be arrested within 3-6 months on fraud charges so he has been dumping shares past year. $40 Billion so far
This is leaving Tesla in a shit pile 🤬. Any investor would be pissed. Elon has to go, that’s what all investors are demanding from Tesla board pic.twitter.com/4V1vNHS9Fp
— RΛISINI ライシニ (@iamraisini) December 22, 2022
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%.
Tesla’s plummeting stock price might be “funny” to some but consider this: my portfolio has suffered to the extent that I will have to reduce the number of multi-family homes I buy to drive up rent in cities I’ve never even been to. Still laughing?
— rob delaney (@robdelaney) December 27, 2022
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.