Tesla
Tesla and its founder Elon Musk have squared off with short sellers regularly, and despite run-ins with the Securities and Exchange Commission (SEC), for now, the former has been winning the battles. Short bets on Tesla were sitting on mark-to-market losses of over $40 billion at end-2020, as the firm’s shares surged 740% last year. This is based on data collated by Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, a financial-analysis company.
It’s little wonder Musk and the redditors have found much in common and the former continues to rally the ape troops through his tweets. Dusaniwsky told Institutional Investor that shorting Tesla is “by far the longest unprofitable short I’ve ever seen."
While companies and founders have a dislike for short sellers, because they can bring down stock prices and cause the cost of capital to rise, Musk’s disdain for the short selling community is unrivaled; with perhaps only the r/wallstreetbets community giving serious competition. In mid-2020, Musk took a dig at short sellers by releasing “short shorts". These now sell at a premium on ebay.
Despite Musk’s wins, the shorts haven’t budged much, Tesla continues to be the most shorted stock in terms of the value of short positions. The rally in Tesla shares, experts say, is not so much because shorts are covering, but because of large amounts of buying in out-of-the-money options, where premiums are low. With such trades, option writers hedge their position by buying a certain quantity of the underlying stock, pushing up prices partly as a result. Then, there was the the whole Robinhood phenomenon which drove up some popular stocks such as Tesla. All of this led a so-called gamma squeeze, requiring option writers to buy a greater quantity of the underlying stock to hedge the position adequately.