Tesla short sellers lose $1.5bn in a single day
Musk’s firm posts surprise Q3 profit
Electric car company Tesla (TSLA) posted an unexpected quarterly profit on Thursday, October 24, 2019. Its shares gained by almost 20 per cent following the news.
The announcement caught investors off guard as most analysts had predicted Elon Musk’s firm to suffer yet another loss. While some may have avoided Tesla in recent months, many have actively bet against it. In fact, it has been one of the most shorted stocks this year.
It is thought that those short selling Tesla stock lost around $1.5bn (£1.17bn, €1.35bn) on October 24 alone. This is only the fourth time in five years that Tesla has posted a quarterly profit. The company made a loss of $600 million in the first half of 2019.
Tesla’s profit is due in large part to its ability to recognise as profit an allotment of cash it had already collected for pre-sales of its "summon" feature, which only became available in September 2019.
The opening of a new factory in China and Beijing’s recent approval for Tesla to expand sales throughout the emerging superpower also contributed to this surprise rebound.
It is unlikely that short sellers will give up on Tesla completely. Some argue that US-China car tariffs will hit the firm hard, while others point to growing competition from long-established car brands.
Even taking this quarter’s rise into account, Tesla's shares are still down 10.5 per cent this year.