TSLA Stock: Short Interest Falls, Did Bears Give Up Early?

  • Tesla (NASDAQ:TSLA) stock’s short interest fell to a new historic low, according to the most recent filing. After the strong rally over the last four months, TSLA shares have come under pressure.
  • With losses running into billions of dollars, short-sellers have gradually squared off their positions. Some bears will miss on the coronavirus driven sell-off in Tesla’s stock price.

TSLA stock short interest

According to the most recent filing, TSLA stock’s short interest fell to 18,385,351 shares on February 14. The days-to-cover ratio was 1. Notably, Tesla’s short interest has fallen in every fortnight since October 15, 2019. The rally in Tesla shares started around mid-October. Surprise profits in the third and fourth quarter of 2019 helped the stock move to higher price levels. The positive response to Tesla Cybertruck also helped in addition to a massive short covering.

CEO Elon Musk

Optimism about electric cars and Tesla’s pole position in the electric vehicle industry has helped the stock. TSLA also took advantage of its higher stock price by selling shares to raise capital. The higher capital came a few weeks after CEO Elon Musk said during the fourth-quarter earnings call that the company doesn’t intend to raise capital. NIO (NYSE:NIO), a Chinese electric vehicle producer, has also raised capital through convertible notes. The company has also entered into a preliminary agreement with the municipal government of Hefei, Anhui Province, to raise another $1.4 billion.

Shares fall due to coronavirus threat

TSLA shares have fallen over the last few trading sessions amid the sell-off due to the coronavirus. The Dow Jones Index has lost more than 2,000 points this week. Meanwhile, Tesla stock has closed in the red for all three trading days this week. The stock has lost 13.6% during this period. Short-sellers benefit when the stock that they’re holding falls. Tesla has been among the most shorted shares on the NYSE. However, as TSLA’s stock price soared over the last four months, short-sellers covered their positions and cut losses.

Did TSLA stock short-sellers give up too early?

As their losses increased, TSLA short-sellers had to cover up their position. The almost incredible rally in the stock left limited options on the table, especially for weak hands that can’t tolerate such massive losses. In hindsight, it looks like TSLA short-sellers should have held onto their positions. However, it’s different to make the decision when your losses are amplifying every day. TSLA stock has seen wild price movements this year, which makes the situation tough for short-sellers. Read TSLA Stock Spikes: Is It Fundamentals or Speculation? to learn more.