April 3, 2018 / 3:48 PM / 10 months ago

Investors raise bets against Tesla shares - S3 Partners

NEW YORK (Reuters) - Investors raised their bets against Tesla Inc shares by 10 percent since mid-March, according to data provided by S3 Partners LLC on Tuesday, betting the market was too optimistic on the electric car maker’s prospects.

Tesla shares sold short now stand at 31.5 million, or 25 percent of freely available shares, according to the financial data company. Short-sellers aim to make a profit by selling borrowed shares in the hope of buying them back later at a lower price.

The milestone comes as pressure builds on the company to show it can churn out its less expensive Model 3 sedans without raising more cash from investors. A fatal Tesla Model X car crash in California on March 23 also pressured share prices as well as the company’s options and debt-market rating.

“In terms of expected returns it’s not as high as other companies we want to own,” said Jia Ye, partner at First Quadrant LP, which holds a short position in the stock.

“We just found better companies to take risk on than Tesla.”

Tesla on Tuesday sought to quash any speculation it might need to raise more capital this year, driving the company’s battered shares higher as it also announced it built 2,020 of its Model 3 sedans in the last seven days.

Tesla shares were up 6.7 percent at $269.42 on Tuesday afternoon, compared with a 12-month peak of $389 last September. The company did not respond to a request for comment.

Billionaire investor David Einhorn, who has been betting for months that Tesla’s stock price will fall, did not mention the carmaker by name in his quarterly letter to clients on Tuesday.

Tesla is part of Einhorn’s so-called bubble basket, which also includes bets against Amazon.com Inc and Netflix Inc. While conventional wisdom suggests that recent turbulence in these stocks could have benefited short-sellers like Einhorn’s Greenlight Capital Inc, Einhorn said the shorts did not perform as he hoped this year.

Meanwhile, JPMorgan Chase & Co strategists said in a note on Tuesday that the options market is underpricing Tesla risks, saying the shares “may be unable to escape a continued sell-off as a confluence of unfortunate events may seal its fate” regardless of the production results.

Short-seller Jim Chanos of Kynikos Associates LP told Reuters in November he continued to add to his short position in Tesla throughout 2017.

Reporting by Jennifer Ablan and Trevor Hunnicutt in New York; Additional reporting by Svea Herbst-Bayliss in Boston and Saqib Iqbal Ahmed in New York; Editing by Matthew Lewis

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