Tesla & Sunedison Still Among Short-Sellers' Favorites

Short sellers continue to pile up on Tesla Motors Inc TSLA and Sunedison Inc SUNEQ, and are giving no signs of letting up. So, yet again, these two stocks made it to the top of Astec Analytics’ hot stocks list, which includes the firm’s top picks from a securities lending perspective.

Tesla Motors

Astec’s top pick this week was, same as last week – although with some reluctance, Tesla. But, unlike last week, it’s selection was not warranted by a surge in the stock price; instead, this week it was justified by the accelerating decline in short interest, the report explained.

Related Link: 80% Of Tesla Shares Are Borrowed By Short Sellers

Short interest levels had already fallen 10 percent since its peak in March; however, last week the level tumbled an extra 11 percent. And, as demand to borrow the stock continued to decline, so did the borrowing costs, which plummeted roughly 20 percent over the last seven days.

“The brakes appear to have been applied to the share price as its advance has halted,” the analysts said. After hitting a peak of $265.42 on April 6, the stock price dropped slightly, closing at $253.75 last week, still about $30 below the 12-month high. “With short interest falling, it appears that an increasing number of short sellers are crystallizing their losses and getting out of the way of Tesla,” the note concluded.

SunEdison

SunEdison finally filed for Chapter 11 bankruptcy protection on April 23. According to the company, this will “allow it to sell non-core assets, reduce debt and emerge stronger,” Astec’s note read. Moreover, the analysts pointed out, the company was granted $300 million debtor in possession funding support to help it reorganize. Nonetheless, the stock price continued to sink over the week, closing at $0.21 – ahead of the Chapter 11 filing.

Related Link: Short-Selling Activity Is Getting Hotter At SunEdison

“Short sellers were making the most of the latest fall and a rising expectation that bankruptcy is inevitable by increasing the short positions once more,” the firm expounded. Borrow volumes rose 22 percent over the last seven days, driven by short sellers moving to make sure that they were in place in the event of a total collapse of the company.

As one might expect in this situation, the cost of borrowing the stock spiked; however, few anticipated the cost would triple! “Given the timescales being spoken around SunEdison, even these new higher levels of fees may not be much to worry about,” the analysts finished.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.