(Repeats story published Tuesday to widen distribution)
By Noel Randewich
SAN FRANCISCO Feb 22 Short sellers have been at
the losing end of a tug-of-war with Tesla Inc investors
in 2017, with some surrendering in recent weeks following nearly
$2 billion in losses as shares of the electric car maker
approach record highs.
Its quarterly report after the bell on Wednesday may offer
fresh evidence for competing views about whether Tesla will
become a carbon-free energy and transportation heavyweight or be
overtaken first by older, deep-pocketed manufacturers like
General Motors Co.
The stock has surged 41 percent since President Donald
Trump's November election, surprising many who predicted the
company led by billionaire Elon Musk would suffer under a
Republican government averse to supporting clean-energy
companies with federal tax subsidies.
In 2017, traders have suffered paper losses of $1.95 billion
betting against Tesla by shorting its shares, equivalent to 23
percent of the stock's average daily short interest during that
time of $8.5 billion, according to an estimate by S3 Partners, a
financial analytics firm.
On Monday, short interest was $8.1 billion, down from a high
of $9.5 billion at the end of January after some traders bought
back shares to avoid additional losses, according to S3, a
process known as short covering.
"People are covering like crazy. That's why it's gone up so
much," said Vilas Capital Management Chief Executive Officer
John Thompson, who has been shorting Tesla for over a year.
Thompson said gains in other stocks in his portfolio have
provided leeway to maintain his bet against Tesla.
Short interest in Tesla has receded from record levels of
22.2 percent in November, but remains elevated. At the end of
January, 21.3 percent of Tesla's outstanding shares were sold
short, a higher portion than any other U.S. company with a stock
market value above $10 billion, according to Thomson Reuters
Many investors believe that nearly 400 thousand pre-orders
for the upcoming Tesla Model 3 sedan offer a glimpse of future
strong demand for Tesla's cars.
Critics say Musk's targets for vehicle production are
unrealistic and that investors underestimate how much additional
equity Tesla may be forced to sell to keep the company going
until it becomes regularly profitable.
Recent filing data shows mutual funds increasingly betting
on Tesla. The number of funds reporting new positions in recent
quarterly filings has jumped 79 percent, while the number of
selling out dropped by 44 percent, according to Morningstar.
(Reporting by Noel Randewich; Editing by Lisa Shumaker)