Nikola Short Sellers Up $414M Following Reworked GM Deal

Nikola Corporation NKLA shares dropped another 16% on Tuesday morning and are now down 40% in two days after the company announced a reworked deal with General Motors Company GM that doesn't involve GM taking an equity stake in Nikola.

Nikola short sellers took a massive hit back in September when Nikola announced a new partnership with GM. However, short sellers have since made big gains after a Hindenburg Research report accusing Nikola of being “an intricate fraud built on dozens of lies” led to the resignation of Nikola chairman Trevor Milton.

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Nikola shares initially climbed as much as 41% in September after the company announced the initial GM deal that involved GM taking an $11-billion stake in the company in exchange for producing Nikola’s Badger electric trucks. Yet shares of the EV stock tanked this week when the new deal made no mention of an equity stake for GM nor the Badger truck.

Nikola currently has $1.6 billion in short interest, according to S3 Partners analyst Ihor Dusaniwsky. That short interest represents about 57.3 million shares, or 42.5% of its float.

Nikola Short Selling Accelerates: Dusaniwsky said Nikola’s short interest is up by 13.8 million shares in the last month, but short selling has accelerated in the last week.

In the last week alone, Nikola’s short interest increased by 5.6 million shares, or about $158 million, ahead of the GM news.

Nikola shares traded as high as $93.99 back in June when the stock first began trading via a direct listing but have since traded back down to around $20 following the Hindenburg report, the Milton departure and the reworked GM deal.

Year-to-date, Nikola short sellers are up $309 million in net-of-financing mark-to-market profits. Monday’s big $414 million gain on the GM move put Nikola short sellers back in the black for the year.

Dusaniwsky said traders should expect more pressure in Nikola shares in the coming days.

“With shorts once again profitable in the stock and its stock price trending downwards It looks like NKLA’s recent short selling trend should continue,” he wrote.

Benzinga’s Take: Nikola’s short position is a relatively large percentage of the stock’s float, but Nikola is only the third largest short in the auto industry.

Tesla Inc TSLA is by far the most popular auto stock among short sellers, with $28.2 billion in total short interest.