Tesla stock rallied by more than 15% after the electric car maker reported its second quarter 2018 results on August 1, 2018.
Though Options traders piled on 330 weekly calls before Tesla reported its earnings, giving enough indication that the option market was firmly bullish on Tesla stock, the shorts refused to yield their position and lost nearly $1.7 billion in one day.
According to data from S3 partners, Tesla short interest now stands at $12.3 billion. Year to date loss reads $1.44 billion. Tesla’s sharp up and down movement helped the shorts save some face over the last few weeks, but things sharply turned the other way as market sentiment turned upbeat after Tesla released second quarter earnings report.
Ihor Dusaniwsky, Managing Director of Predictive Analytics at S3 Partners says that he did not see a lot of buy to covers yesterday, despite the shorts accumulating one of the biggest ever single day losses this year. But he expects more short covering over the next few days.
#Tesla short recap as of 8/2 close: $TSLA up $48.70, short interest $12.3 billion. Shorts were down -$1.7 billion in mark-to-market losses today, year-to-date P/L is now in the red, -$1.44 billion. Did not see a lot of buy-to-covers today, expecting more over the next few days. pic.twitter.com/fVeB7Vb1KB
— Ihor Dusaniwsky (@ihors3) August 2, 2018
The shorts have lost betting against Tesla in the last two years and things have gone in the same direction this year as well. We are seven months into 2018 and year to date losses have now mounted to $1.44 billion.
Tesla has repeatedly stated that the company is focused on becoming profitable and the company expects to be GAAP profitable in Q3 and Q4.
“we still expect to achieve GAAP profitability in Q3 and Q4. Going forward, we believe Tesla can achieve sustained quarterly profits, absent a severe force majeure or economic downturn, while continuing to grow at a rapid pace.
We expect to generate positive cash including operating cash flows and capital expenditures, as well as the normal inflow of cash received from non-recourse financing activities on leased vehicles and solar products.
– Tesla Q2 18 Shareholder Letter.
Though Tesla critics still have their doubts about Tesla achieving this feat, the market was indeed taken by surprise when Tesla ended its second quarter 2018 with 2.236 billion dollars cash on hand.
Gordon Johnson, managing director at Vertical Group, told TheStreet before Tesla reported its second quarter results that , “He and his team believe Tesla will exit the quarter (Q2) with less than $1 billion in cash. Frightening. Johnson argued that the cash actually available to the company is much less than it appears to investors.”
Even if Tesla manages to report operating profits in the next two quarters, things will get extremely difficult for Tesla Shorts to maintain their short position.
