Tesla Short Sellers Are Getting Burned As Stock Keeps Soaring For years, Elon Musk skeptics have shorted Tesla stock, confident the electric carmaker was on the brink of disaster. Instead, share value has skyrocketed, costing short sellers billions.
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Electric Burn: Those Who Bet Against Elon Musk And Tesla Are Paying A Big Price

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Electric Burn: Those Who Bet Against Elon Musk And Tesla Are Paying A Big Price

Electric Burn: Those Who Bet Against Elon Musk And Tesla Are Paying A Big Price

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We're just a couple of weeks into 2020, but so far, the electric automaker Tesla is having a good year. And for a small but vocal group of people, that's bad news. They're short sellers. They hope to make money by betting against Elon Musk. NPR's Camila Domonoske has their story.

CAMILA DOMONOSKE, BYLINE: Elon Musk's goals were always ambitious. He said he'd make money and save the world by making electric cars cool. From the start, some people have been sure that he would fail. So they shorted Tesla stock, placing a bet its value would go down. Way back in 2012 on Fox Business, Elon Musk warned short sellers that was a bad bet.

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ELON MUSK: There's a tsunami of hurt coming for the short - those holding a short position. It's going to be very, very unpleasant. I advise people to exit while there is time.

DOMONOSKE: A tsunami of hurt. And Musk was right. Over the next year, Tesla stock went from less than 30 bucks to 180. And now...

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UNIDENTIFIED REPORTER #1: Tesla shares surging for a record high today.

UNIDENTIFIED REPORTER #2: Passed a major milestone after it delivered more than 100,000 cars.

UNIDENTIFIED REPORTER #3: Tesla topping the tape today, the electric automaker surging nearly 4%.

DOMONOSKE: Tesla stock has topped $500, making it the highest valued U.S. automaker ever. But the short sellers didn't give up. Instead, they formed a community. And they're waging a very public battle with Elon Musk superfans. Tesla fans say Elon Musk is a genius who's made drool-worthy eco-friendly cars with cutting-edge autonomous technology, and sales are through the roof.

The shorts say Elon Musk is a fraud who makes outlandish statements, that Tesla autopilot is dangerous, even, quote, "homicidal." And sales are driven by subsidies that won't last forever.

IHOR DUSANIWSKY: So there is strong conviction on both sides - more than strong. There's cultish conviction on both sides.

DOMONOSKE: Ihor Dusaniwsky is the head of predictive analytics at S3 Partners, which monitors real-time data on the stock market.

DUSANIWSKY: It's like a college football game. People are just crazy fans, and it doesn't matter what the team does.

DOMONOSKE: And Dusaniwsky is kind of like the play-by-play announcer. He says, right now, it looks bad for the short sellers, really bad. Remember, a short sale is betting a stock's price will go down. If stocks go up instead, you lose money. It's very risky. You can lose even more money than you put in. And Tesla's stock price has soared. Since 2016, Tesla short sellers are down more than $11 billion - billion with a B. And short sellers are down $2.6 billion in just the first two weeks of this year.

DUSANIWSKY: So not a happy new year for Tesla short sellers.

MARK SPIEGEL: We've lost a lot of money.

DOMONOSKE: Mark Spiegel is team Tesla short. He's the general partner of a small hedge fund, and he placed a large bet against Tesla starting five years ago.

SPIEGEL: So I am the world's worst predictor of Tesla stock price.

DOMONOSKE: That has meant seven-figure losses for his small fund.

SPIEGEL: We were running it at 20% of the fund, sometimes a third of the fund. And I slashed it back today because it's just so decoupled from reality.

DOMONOSKE: But he hasn't changed his mind about Tesla. He still says the prices will collapse eventually, just like he's been saying for years.

SPIEGEL: Obviously, we've been way too early on the timing, but you never know that in advance.

DOMONOSKE: Many short sellers have had to back away from their bets as Tesla stock skyrockets. Meanwhile, the back-and-forth continues. Team Elon Musk says the shorts are dead wrong. And the shorts? They say their foes are short-sighted.

Camila Domonoske, NPR News.

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