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Tesla shares surge past $900, squeezing short sellers

Tesla Model S
The value of Tesla short bets dropped $3.2 billion on Monday, the largest one-day decline.
(Spencer Platt / Getty Images)

Tesla jumped as much as 24% on Tuesday, extending a vertiginous stock spike that has made it the world’s second-largest automaker by market value.

The stock, which has more than doubled since December, surged as high as $967 in afternoon trading before settling back to close at $887.06, up 13.7%. It was given a boost after the company last week reported a $105-million profit for the fourth quarter, prompting short sellers to rapidly claw back bearish bets on the electric car maker.

The rapid share price rise sparked a flurry of buying on Monday. With 58.6 million shares traded, Tuesday was the stock’s most active day on record.

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The stock’s climb continued despite the disclosure that Saudi Arabia’s $320-billion sovereign wealth fund had all but eliminated its stake in the electric-car maker. The fund held stock worth just $16.4 million at the end of December, according to a Tuesday filing with the Securities and Exchange Commission. The Saudis built their stake in Tesla in 2018, disclosing 8.3 million shares in the company that were worth $2.8 billion in December that year. The shares had slipped in value to $2 billion at the end of September 2019, before the Saudis began to reduce their stake. That position would now be valued at about $7.7 billion if it had not been sold in the fourth quarter.

Bill Selesky, an analyst for Argus Research, said the “crazy” rally reflected positive views on earnings and strong demand for the Model 3, one of the carmaker’s flagship vehicles.

“When consumers think about buying an electric vehicle, they think about buying a Tesla — that is what is driving the market,” Selesky said. “What will make or break Tesla stock is demand, and right now it’s off the charts, especially for the Model 3.”

“While Tesla shares remain on a historic rally post-earnings, the bull party will probably continue in the near term,” said Dan Ives, an analyst with Wedbush Securities. He added the stock could hit $1,000 if the company successfully tapped demand in China for electric vehicles.

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Last week, Tesla also announced a weeklong delay to production for its Shanghai factory because of the coronavirus outbreak. Ives said the outbreak was “tragic,” but “fundamentally it should have a negligible impact on Tesla’s China growth trajectory.”

The stock price boom has hurt the value of short bets against the company. By midmorning on Tuesday, those short positions fell $2.7 billion in value, following a $3.2-billion drop on Monday, which was the largest one-day decline in value for Tesla short bets, according to S3 Partners. The paper losses bring the total drop in value of Tesla short positions to $11.6 billion for the year.

Mark Spiegel of Stanphyl Capital, which has maintained a short position in the stock for years, said the value of his fund had dropped 9% for the year because of Tesla’s rising stock price. He trimmed his bet on Monday to cap the value of the short position at less than 5% of the fund.

“This is completely uncharted territory,” said Spiegel, who remains confident the stock price will drop. “At some point, one of these tops will be the blow-off top and then the bubble will collapse.”

Tuesday’s advance gave Tesla a market capitalization of $161 billion, which makes it the biggest carmaker by market value behind Japan’s Toyota at about $227 billion.

In recent weeks, Tesla surpassed the combined market capitalization of Detroit’s Big Three — General Motors, Ford and Fiat Chrysler — which have a combined value of $104 billion.

© The Financial Times Ltd. 2020. All rights reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied or modified in any way.


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