Tesla, Alibaba, GameStop and Co: These stocks were particularly expensive for short sellers

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• Elon Musk shoots at short sellers
• Tesla leads in losing short calls
• Also a popular destination for tech giants

Anger about Tesla short sellers

“Stormy weather in Shortville…” Tesla CEO Elon Musk wrote on his Twitter account in 2017, shooting at investors who were betting on the electric car maker’s stock price collapsing. In July 2020, Musk made fun of the short sellers again by drawing attention to the sale of Tesla shorts in his own online shop – and in a way becoming a Tesla short seller himself. Over the years, the jack of all trades has made his aversion to short selling public and has even called for short selling to be banned.

Stormy weather in Shortville …

– Elon Musk (@elonmusk) April 3, 2017

And in fact, short sellers with short sales of the electric car manufacturer have had quite bad luck in the past. Ihor Dusaniwsky from the analysis house S3 Partners evaluated which ten short calls over a period of five years (2015 to the end of September 2020) were the most unprofitable, as the finance portal “ValueWalk” reports. The majority of the sales of call options identified by Dusaniwsky took place in 2020.

Short positions against Tesla stock with a loss of billions

And so the US electric car manufacturer Tesla actually takes first place in this list. Not only that, the e-pioneer made it into the ranking four years in a row. In 2020 alone, short sellers lost a total of $29.2 billion. The short interest positions amounted to a value of 16 billion US dollars. At the end of September 2020, the volume of short positions against Tesla was approximately 57.1 million shares.

The well-known investors Doug Kass, Whitney Tilson and David Einhorn had given bearish forecasts for the paper in the past, as “ValueWalk” reports, but have since admitted in part that the Tesla share price is not suitable for short calls own. The convinced Tesla shortseller Jim Chanos also admitted that he was wrong in his assessment of the group led by Elon Musk and made a change of strategy. The star investor converted his short positions into put options in 2021. However, the well-known short seller remains critical of Tesla.

Tech giants Alibaba, Apple and Amazon are also popular targets

Based on the period from 2015 to 2020, the Chinese B2B platform Alibaba follows directly behind Tesla. While the stock was ranked as the seventh-worst short call in 2020, the trader ranked second in 2019 and even number one in 2017 with net market losses of $10.6 billion. By the end of September 2020, the number of short sales here was approximately 46.5 million shares.

The two US tech groups Apple and Amazon follow in third and fourth place. In 2019, the iPhone maker even topped the list, causing short sellers to lose almost $7 billion. The average short interest rate in 2019 was nearly $10.5 billion. Before the presentation of the new iPhone models in October 2020, the number of short calls rose again significantly. However, there was no sharp drop in the share price. However, as of the end of the third quarter of 2020, the size of short sales amounted to more than 88 million shares.

The situation is similar at Amazon: The number of short sellers increased after the online retailer’s shares shot up after the Corona slump in March and market participants feared an overvaluation. In 2020, the short interest rate was $8.5 billion, resulting in short seller losses of $5.9 billion. At the end of September 2020, 2.7 million Amazon shares were still held short.

Other Corona winners represented in the top 10

The other places are mainly followed by companies that were able to benefit from the Corona crisis. While NVIDIA, the processor and chipset maker, wasn’t as popular with short sellers in 2020 as it was before, it still ranked fifth on the five-year average. Despite the increased demand for remote work and tools designed to support collaborative work, many investors also bet against the video telephony service Zoom in 2020, which may have been due to criticism of the provider’s security concept. The payment service provider Block was also able to benefit from the crisis, as the focus was increasingly placed on cashless payment methods in order to prevent the virus from spreading. But that didn’t stop short sellers from betting against the company’s share price. The situation is similar for the furniture mail order company Wayfair and the online shop operator Sea, which also benefited from higher demand in 2020. With the semiconductor manufacturer and NVIDIA competitor AMD, the list is closed with another technology group, against which a large number of short sellers bet in the five years examined.

When it comes to big short seller losses, it’s worth mentioning some of the biggest short squeezes in recent history. A short squeeze is a very surprising, fast, dynamic rise in the price of a share, which means that short sellers of the share certificate increasingly withdraw from the title and accordingly have to buy back the short positions, which in turn fuels the price. A short squeeze is every short seller’s nightmare, leading to significant losses that can even spell the bear’s ruin.

One of the most notable cases, not too far behind, is the shortsqueeze at US games retailer GameStop in early 2021. The company’s stock was already massively shorted when a group of resourceful small investors chimed in via the WallStreetBets Reddit forum concerted purchases of GameStop shares in order to boost the price and force the short sellers out of the shares – with success. The GameStop price jumped from USD 17.25 to an all-time high of almost USD 500 within a very short time. According to Bloomberg, hedge funds that were massively short positions in the video game retailer lost more than $6 billion in the action.

A very similar case that falls into the same period is the short squeeze by the US cinema chain AMC Entertainment. During the corona pandemic, for example, the company fell victim to numerous short sellers who bet on the cinema chain going down. Here, too, there was a short squeeze, which can be attributed to small investors. AMC stock price rose from $9 to $70 in a short period of time in May 2021, with losses of $1.23 billion expected in just one week, according to S3 Partners data available to CNBC. Dollars may have come from short sellers.

Editorial office finanzen.net

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