This Has Been a Stellar Year for Tesla Short Sellers

Betting against Tesla was a ruinously bad move in 2020 and 2021, but a winner in 2022, traders say. The company's stock started 2020 trading at around $30 and it hit a peak of more than $400 in November 2021. But it sank to a two-year low of $137.80 on Wednesday, and investors believe it could keep dropping, the Wall Street Journal reports. According to the S3 Partners analytics firm, short sellers—who borrow stocks, sell them immediately, and hope to buy them back at a lower price later and return them to the lender—have made a collective $15 billion from Tesla shares this year, compared to loss of $51 billion in 2020 and 2021. The stock is down more than 65% this year and December is shaping up to be the worst month in its history.

At its peak, Tesla was worth $1.2 trillion, eclipsing the value of the next 10 most valuable automakers combined despite selling relatively few vehicles. It is currently trading at 46.7 times earnings, per the Journal—down from a January 2021 peak of 1,765 times earnings, but still well above the S&P 500 average of 18.1. Tesla had long defied doubters, CNN notes, but the stock has been hit hard this year by issues including supply chain problems and concerns that CEO Elon Musk is too distracted by Twitter, which he acquired at the end of October. Musk, who confirmed Tuesday that he plans to step down as CEO when he finds a replacement "foolish enough to take the job," blames the stock's decline on Federal Reserve policies.

Citron Research founder Andrew Left says he closed his position and took profits this week, but he and other analysts believes Tesla could fall further now that people are paying more attention to the company's fundamentals and Musk's brand has been tarnished by the chaos at Twitter. "It has not been an easy road being a Tesla bear," Left tells the Journal. "It’s been a pain-in-the-ass trade." When New York magazine spoke to Tesla short sellers in August, Left said: "Elon will become unhinged. That’ll be the story of this year. You’ll see it right now, as this price gets lower, he becomes more unhinged as a person." (More Tesla stories.)