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Tesla short sellers lost $3.5 billion in two days of trading after deliveries report

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An electric vehicle of the model Y is pictured during the start of the production at Tesla’s “Gigafactory” on March 22, 2022 in Gruenheide, southeast of Berlin. – US electric car pioneer Tesla received the go-ahead for its “gigafactory” in Germany on March 4, 2022, paving the way for production to begin shortly after an approval process dogged by delays and setbacks. (Photo by Patrick Pleul / POOL / AFP) (Photo by PATRICK PLEUL/POOL/AFP via Getty Images)
Patrick Pleul | Afp | Getty Images

Tesla’s better-than-expected deliveries report this week has been bad news for traders betting on a drop in the electric vehicle maker’s stock.

With the shares rallying 17% in the two trading days since the second-quarter report, short sellers have lost an estimated $3.5 billion on a mark-to-market basis, according to data from S3 Partners.

It’s been a painful few months for short sellers, as Tesla shares have soared 73% since bottoming for the year in April. After closing at $246.39 in shortened trading on Wednesday, the stock is a little more than $2 shy of wiping out its loss for the year.

Short interest in Tesla currently stands at 3.5% of float, or 97 million shares shorted, with a $22.4 billion notional value.

Tesla reported second-quarter deliveries on Tuesday of 443,956, topping Wall Street estimates of 439,000. Deliveries fell 4.8% from a year earlier, but the decline wasn’t as steep as the 8.5% year-over-year drop in the first quarter.

While the deliveries report suggested demand for Tesla vehicles remains stronger than feared, it offered a limited view into company performance.

With its autos business mired in a sales decline due to an aging lineup, and stronger competition than ever, Tesla has for months been incentivizing EV purchases with discounts, low- or no-interest financing options and other perks.

In the second quarter, for example, Tesla slashed prices in Germany and Norway and offered zero-interest loan promos in China, even for its entry-level Model 3 sedan and Model Y SUVs. In the U.S., Tesla offered a three-year, 2% APR financing deal for buyers of its rear-wheel drive Model 3.

Meanwhile, Tesla’s newest model, the angular steel Cybertruck, has gotten off to a slow start, with quality problems necessitating four voluntary recalls in the U.S. in less than a year.

A Tesla Cybertruck sits on a lot at a Tesla dealership on April 15, 2024 in Austin, Texas. 
Brandon Bell | Getty Images

Tesla’s earnings report later this month will provide a clearer picture of the company’s financial health. Analysts are expecting to see a revenue decline of 2.9% to $24.2 billion, according to LSEG, following a decline of 9% in the first quarter.

“Clearly the financing promos on both the Model Y and Model 3 drove considerable volume growth, but as we have seen with other sizable price cuts and discounts, demand is pulled forward and new demand must be created in 3Q and beyond, which has proven challenging over the last 18 months,” Ronald Jewsikow, an analyst at Guggenheim Partners, wrote in a note to clients on Wednesday. He has a sell rating on the stock.

Tesla CEO Elon Musk, whose net worth has increased by about $15 billion in the past two days, celebrated the hit that short sellers are taking. That included a personal attack on Microsoft co-founder Bill Gates, who has a history of shorting the stock and beefing with Musk.

“Once Tesla fully solves autonomy and has Optimus in volume production, anyone still holding a short position will be obliterated,” Musk wrote in a post on X. “Even Gates.”

Optimus is Tesla’s humanoid robot now being developed. Musk has claimed these robots will one day turn Tesla into a company worth tens of trillions of dollars. Tesla’s market cap is currently below $800 billion.

Meanwhile, Tesla’s challenges in its core, automotive business remain.

The company regularly rolls out improvements to its in-vehicle software, and a new update promises to bring YouTube, Amazon Music, and weather and air quality apps to drivers’ infotainment systems. But Tesla still hasn’t delivered software that can turn its existing cars into self-driving vehicles.

Further, a recent Axios-Harris poll found, the company is experiencing brand deterioration that’s at least partly due to Musk’s “antics” and “political rants.” A New York Times survey out this week also said Musk’s “polarizing statements,” and “political activity” are driving away some “left-leaning consumers.”

Musk has called for a “red wave” in upcoming U.S. elections and has said that he and former President Donald Trump speak frequently. He’s also shared, liked and promoted far-right accounts and content on X. Proponents of electric vehicles, by contrast, tend to be lean left politically, according to research from Pew Research and Gallup last year.

WATCH: Tesla deliveries are being ‘overanalyzed’ by investors

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