Tesla, Inc. TSLA stock rally accelerated following the company’s second-quarter deliveries report and the steep ascent obliterated the short positions of some hedge funds, a report said on Sunday.
Short Interest Spikes: The percent of hedge funds tracked by Hazeltree which shorted Tesla rose from under 15% at the end of March to 18% at the end of June, said Bloomberg in a report. This marked the highest percentage in over a year, the report said.
These contrarian bets may have saddled the funds with losses, the report said. In the two sessions following the deliveries report, Tesla shorts may have lost $3.5 billion on a mark-to-market basis, according to S3 Partners’ estimates, CNBC reported.
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Analysts Positive Of Turnaround: Tesla’s profit margins are on track to see an improvement, thanks to lower production and raw material costs, Morningstar analyst Seth Goldstein said, Bloomberg reported. While expressing confidence in the company returning to profit growth in 2025, the analyst reportedly said “How Tesla handles the market's intensifying focus on affordable EVs will be key.”
Hedge fund Ambient’s chief investment officer Fabio Pecce reportedly said that Tesla is “very difficult for us to position,” given investor dilemma regarding the company’s fundamentals and management’s effectiveness. That said, Blue Orca Capital founder Soren Aandahl said the valuations in the EV space are so beat up that he now avoided shorting the sector. “It's no longer an obvious contrarian bet, because those tend to do best if investors enter ‘when things are a little bit higher,'” he said.
But Eirik Hogner, deputy portfolio manager at hedge fund Clean Energy Transition, however, sees more downside. “Ultimately, I think you need to see more bankruptcies" before the market starts to look healthier,” he said. Fisker and Arrival are among the EV startups that went bankrupt recently, while some of the newbies are operating with a severe cash crunch.
Fund manager Gary Black, who co-founded Future Fund, reminded his followers of his comments from the previous week. “I said last week that those who short $TSLA should have their heads examined,” he said. “The fundamentals of the EV business are too strong and $TSLA is too well positioned to take advantage of the secular megatrends favoring EVs over ICE vehicles,” he added.
In premarket trading, the stock fell 1.66% to $247.35, according to Benzinga Pro data. The stock has gained about 38% since it began the recent streak of eight sessions of gains. With Friday’s advance, the stock wiped away its year-to-date loss and is up 1.2% for the year.
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