For the third consecutive month, Tesla has clinched the top spot on the list of the most shorted large-cap stock in the US, according to a recent report from securities lending data firm Hazeltree. This revelation comes as Tesla’s stock rallied by over 5% on Monday, driven in part by a positive assessment from Morgan Stanley regarding the potential impact of the automaker’s Dojo supercomputer on its market value.
A short bet, for those unfamiliar with the term, is a speculative investment strategy that anticipates a decline in a stock’s price. Tesla’s consistent presence at the top of this list indicates that there is a notable segment of the market betting against the electric vehicle (EV) giant’s stock.
Hazeltree, a firm known for tracking equity lending data on a global scale, also identified Charter Communications and Apple as the second and third most shorted stocks, respectively, in the previous month.
When approached for comment, representatives from Tesla, Charter Communications, and Apple did not respond immediately.
Further insights into the nature of these short positions were provided by data compiled by research firm Whale Wisdom, which disclosed a variety of strategies adopted by investors shorting Tesla. This information was reported to the Securities and Exchange Commission as of June 30th.
Among these strategies, investors with funds were found to be taking both long and short positions in Tesla. This group included Diamond Hill, Leuthold Funds, and Forum Funds. Additionally, a fund of funds managed by Blackstone contained short positions from other hedge funds and investment managers.
Other approaches to shorting Tesla were observed in trades held by the hedge fund AQR Capital Management and the investment manager Federated Hermes. These entities aimed to mitigate market risk by offsetting potential losses from Tesla’s stock price fluctuations with positions in different asset classes.
In a somewhat unrelated but intriguing development, Tesla’s CEO Elon Musk took to his social media platform, X, to comment on the short position held by Microsoft co-founder Bill Gates against his company. Musk’s response, as revealed in Walter Isaacson’s recent biography, was: “Taking out a short position against Tesla, as Gates did, results in the highest return only if a company goes bankrupt!” This statement underscores Musk’s staunch belief in Tesla’s long-term viability.
The trend of hedge funds shorting U.S. stocks has been accelerating in recent weeks, as noted in a report from Goldman Sachs. Total short bets have now reached their highest value in six months, reflecting a growing skepticism among some investors.
According to Goldman Sachs, hedge funds have maintained a net short position in consumer discretionary stocks, which includes Tesla, in the year leading up to September 8th.
Dan Izzo, founder of the hedge fund Blackbird Capital, shared his perspective on shorting Tesla: “If I’m honest, I’ve only lost money trying to short TSLA. Not because I’m wrong about it, but because the market can be irrational for longer than I can afford to be proven right.”
In conclusion, the status of Tesla as the most shorted large-cap US stock for the third consecutive month highlights the ongoing debate and volatility surrounding the company’s performance in the stock market. Investors, both bullish and bearish, continue to closely monitor Tesla, and its ability to defy short sellers in the long run remains an open question in the ever-evolving world of EVs and financial markets.
Source: Reuters
