Tesla Bears Suffer Record Short-Sale Loss in 2020 – S3 Partners

By Chuck Mikolajczak

NEW YORK (Reuters) – Short bets on Tesla Inc were the most unprofitable trade in 2020, as the electric automaker saw its shares surge over 740% en route to becoming the world’s most valuable automaker.

In a note to clients, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, said mark-to-market short losses for Tesla totaled over $40 billion, as it was “far and away the most unprofitable trade in 2020 and had the largest yearly loss we have seen historically.”

Overall, shorts were down $245 billion, net of financing, in 2020 as the S&P 500 and Nasdaq rallied back from pandemic selling early in the year to near record highs as 2020 was closed out.

Investors who sell securities “short” borrow shares and then sell them, expecting the stock to fall so they can buy the shares back at the lower price, return them to the lender and pocket the difference.

Dusaniwsky noted that most of the most unprofitable shorts of 2020 were technology or “stay at home” plays due to the COVID-19 pandemic. Apple Inc was the next most unprofitable short play at about $6.7 billion in losses.

Rounding out the top five were Amazon.com Inc at $5.8 billion, U.S. listed shares of Pinduoduo Inc at $4.8 billion and Square Inc at $4.7 billion.

On the flip side, there were only five short positions that drew over $1 billion in mark-to-market profits, according to S3. The top short play was Exxon Mobil Corp as the oil major slumped more than 40% in 2020 in large part due to a plunge in oil prices caused mainly by a lack of demand during the pandemic.

Only four other short positions topped over $1 billion according to S3 – AT&T Inc, Raytheon Co, which was acquired by United Technologies in April to become Raytheon Technologies Corp, U.S.-listed shares of Luckin Coffee Inc and Wells Fargo & Co.

(Reporting by Chuck Mikolajczak; Editing by Alden Bentley and Marguerita Choy)