Investors betting against electronic carmaker Tesla may breathe a sigh of relief after its stock slumped more than 14 per cent.
Tesla is the largest short in the domestic market with short interest of $14.28bn, but short sellers have been dealt a blow in the last week as Tesla’s stock climbed above $900 (£692.7).
Tesla’s stock crashed today over fears that the coronavirus outbreak will delay the timeline for new vehicle deliveries in China.
Analysts also suggest that the sharp drop in Tesla’s shares were inevitable given its meteoric rise.
Short sellers suffered losses of $1.5bn in mark-to-market losses after Tesla beat analyst estimates in its fourth quarter results last week.
Bets against the carmaker are now on the decline. Short sellers decreased their exposure by 1.8m shares, a fall of 6.7 per cent, over the last 30 days.
Tesla’s stock has more than doubled in value since it posted a third quarter profit last year, beating estimates for vehicle deliveries and ramped up production at its Gigafactory in China.
Neil Wilson, chief markests analyst at Markets.com, said the slump occurred because it was a parabolic bubble, meaning that it rises far too quickly and then drops.
“What we see is mean reversion to more stable valuations. Tesla is not worth $900 now – it might be in the future, but certainly not now. $600 is more realistic whilst still pricing in growth potential risk.”
Wilson added: “I cannot stress how abnormal this week’s moves have been.”
Naeem Aslam, chief markets analyst at Avatrade, said: “When the stock is up over 110 per cent in five weeks,
The electric car maker reported profit of $105m in the fourth quarter. It also said that revenue rose to $7.38bn (£5.67bn) from $7.23bn a year earlier, beating Wall Street’s forecast of $7.02bn.