Tesla Inc. shares had an incredible year, according to Bloomberg, it returned 696.45% in 2020. Heading into 2021, a lot of investment banks and fund managers has predicted a mixed performance for Tesla; some say it will go higher while others say it will go lower.
How Tesla shares fair in 2021 is left to be seen, but what is already known is how it performed in 2020. Investors that placed their bets on Tesla, saw their wealth increase tremendously in the past year, but as Investors betted on Tesla, some other Investors betted against it.
Tesla shares leaped above nearly all estimates, Short sellers saw $38 billion in mark-to-market losses throughout 2020, Bloomberg reported Thursday, citing data from S3 Partners. Short interest in the shares fell to less than 6% of Tesla’s float from nearly 20% as the company’s rally led investors to close out their bearish positions.
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Tesla bears lost more than any other group of short-sellers in 2020. Those betting against Apple saw the second-largest deficit of nearly $7 billion, according to Bloomberg.
The hefty losses are up sharply from the previous year’s total. Bearish investors lost $2.9 billion in 2019 as Tesla jumped nearly 70% from its June low into the end of December.
The automaker split its shares on a five-for-one basis in August after Tesla’s stock price climbed above $2,000. While the action had no effect on the company’s fundamentals, some analysts saw the move as helpful to stoking new interest from retail investors.
The stock most recently charged higher upon inclusion in the S&P 500 index. News of Tesla on the S&P lifted shares in mid-November. Soon afterward, Goldman Sachs analysts noted that institutional investors tracking the index could fuel Tesla’s next leg higher as they look to match the benchmark’s weight.
Musk has repeatedly squared off with short sellers on social media. The chief executive’s latest mockery of the group came in July when he sold red shorts featuring the company’s logo. The “short shorts” – marketed as a sardonic rebuke to the company’s short-sellers – proved so popular on their launch day that Tesla’s merchandise website crashed.
Tesla closed at $705.67 per share on Thursday. The company has 20 “buy” ratings, 44 “hold” ratings, and 19 “sell” ratings from analysts.
Short-selling a stock involves selling borrowed shares and buying them at a lower price. Investors shorting a stock profit from a drop in price.
Selling short can be costly if the seller guesses wrong about the price movement. A trader who has bought stock can only lose 100% of their outlay if the stock moves to zero.
However, a trader who has shorted stock can lose much more than 100% of their original investment. The risk comes because there is no ceiling for a stock’s price, it can rise to infinity and beyond—to coin a phrase from another comic character, Buzz Lightyear.
By; Nnamdi M.