Tesla’s Strong Deliveries Report Strikes Serious Blow to Short Sellers, Resulting in $3.5 Billion Loss

By Trisha Andrada

Jul 05, 2024 02:19 AM EDT

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The logo marks the showroom and service center for the US automotive and energy company Tesla in Amsterdam on October 23, 2019. (Photo : JOHN THYS/AFP via Getty Images)

Tesla's short sellers have taken a blow after the company reported better-than-expected deliveries of electric vehicles this week, resulting in an estimated $3.5 billion loss.

Loss of Multi-Billion Dollars

The short sellers have lost around $3.5 billion on a mark-to-market basis despite a 17% surge in the two trading days after the second-quarter announcement, according to data from S3 Partners reported by CNBC.

A short seller borrows shares and sells them immediately in the hope that the price will drop. When the price drops, the seller may buy back the shares and refund the money to their lender.

Tesla's share price soared 73% from its year-end low in April, so short sellers have had a rough few months. With a brief trade ending at $246.39 on Wednesday, July 3, the stock is just over $2 short of recouping its year-to-date loss.

Presently, 97 million shares are shorted, or 3.5% of the float, with a notional value of $22.4 billion in Tesla.

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Surge in Demand?

Tesla recently announced second-quarter deliveries of 443,956 units, more than the 439,000 units expected by Wall Street. Compared to the first quarter, when deliveries declined 8.5% year-over-year, the second quarter's 4.8% decrease was less severe.

The delivery data provided a limited glimpse into the company's operations, but it did show that demand for Tesla automobiles is better than expected.

To reverse its sales slump caused by an outdated lineup and increased competition, Tesla has offered discounts, zero-interest financing, and other incentives to buy EVs for months.

For instance, during the second quarter, Tesla provided zero-interest financing promotions in China and lowered pricing in Germany and Norway, including its entry-level Model 3 sedan and Model Y SUVs. Regarding the Model 3, a rear-wheel drive vehicle, Tesla provided a financing arrangement with a 2% APR for three years to customers in the United States.

Tesla's earnings report later this month will reveal a better picture of its financial situation. Based on LSEG's projections, analysts anticipate a 2.9% drop in sales to $24.2 billion after a 9% drop in the first quarter.

READ MORE: Tesla Announces New 'Military Purchase Program' with $1,000 Discounts Across Models

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