People Who Tried to Short Sell Tesla Lost $38 Billion in 2020

(Noted News) — Tesla and its stock bombarded the financial headlines more than anything else in 2020, and for good reason. Anyone who invested $100,000 in Tesla on January 1st, 2020, would have over $800,000 today, without using any leverage. 

Once criticized as “just a car company” by its detractors, Tesla has been able to seal the deal on being not just a car company, but a full-spectrum “technology” company with its tentacles in multiple industries and reaching for more. 

In 2020, those who bet against Tesla Inc. lost more money than on any other stock. Short sellers of TSLA have lost more than $38 billion according to data from S3 Partners. This was the biggest loss by a long shot, with second-place Apple only causing $7 billion in losses for traders. 

Probably the most vocal short seller of Tesla has been Jim Chanos of Kynikos Associates, who thinks Tesla stock is a bubble based on hype rather than balance sheets.

“Every bull market has a stock that people pin their hopes and dreams on. Certainly one of those stocks this go-around is Tesla.”

Short since 2016, Chanos said his position in Tesla was at first a success, but has recently become “painful,” forcing him to reduce the size of his position. His hedge fund is still net short, however, and is also shorting other companies in the electric vehicle space that he thinks are riding off the hype created by Tesla. 

Ihor Dusaniwsky, managing director at S3 Partners said Tesla’s rally this year was “not only the largest mark-to-market loss for any stock this year, it is the largest yearly mark-to-market loss I have ever seen.” 

“The short squeeze has been going on all year. It’s been an angled straight line down. The big thing about Tesla as opposed to any other stock is that the vast majority of retail shareholders will never be sellers. They love the stock, they love the car, they love Elon Musk and they are adamant long shareholders.”

Will Rhind, CEO of GraniteShares says that Tesla  “is a very polarising stock.”

“It has its fans, many of whom do own Tesla cars, and its fair share of critics, particularly in the financial community, who say the company’s shares are overvalued.”

Elon Musk’s other company, SpaceX, managed to gain several huge contracts from the US military in 2020, creating an air of legitimacy around Musk and consequently Tesla.

If traders trying to short Tesla were 2020’s biggest losers, then Musk was the year’s biggest winner; owning 18% of Tesla has propelled him into being the second richest person on earth, after Amazon’s Jeff Bezos.

Tesla has been investing huge amounts in the continued growth of the company, building new factories and constantly putting money into nascent technology with high upside potential, such as autonomous vehicles. 

Herbert Diess, CEO of Volkswagen, said that he began to trust self-driving cars after test driving a Tesla, referring to the company not as a car company, but a “neural network.”

“One of Tesla’s strengths is that, with their now very large fleet of vehicles, they are constantly collecting driving data and using artificial intelligence to make the system better and better. If you will, Tesla isn’t just a car company, it’s a neural network that is learning to drive better and better.” 

Tesla reported five consecutive profitable quarters before 2021 and will be carrying out their goal of producing half a million cars with the help of their new factories in Austin, Texas, and Berlin, Germany. 

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