Electric vehicle maker Tesla has held onto its title as the most heavily shorted large-cap stock in the U.S. for the third consecutive month, according to a new report from securities firm Hazeltree.
Hazeltree, which tracks short interest across 12,000 equities globally, found Tesla continued to top the list of shorts’ favorite targets through February, despite the stock’s resilience.
In the stock market, a short position refers to investors betting that a company’s share price will decline. Short sellers aim to profit by borrowing shares, immediately selling them, and repurchasing the shares later at a lower price to return them, pocketing the difference.
While Tesla faces no shortage of critics, the sheer size of bearish bets against Elon Musk’s company stands out. Charter Communications and Apple ranked second and third as most shorted large caps behind Tesla.
On platforms like Twitter, Musk has been an outspoken critic of short selling. He argued this week that shorting Tesla amounts to betting against the company’s survival.
“Taking out a short position against Tesla, as [Bill] Gates did, results in the highest return only if a company goes bankrupt!” Musk wrote Monday in response to a news article about Gates having a prior short position.
“Gates placed a massive bet on Tesla dying when our company was at one of its weakest moments several years ago,” Musk added. “Such a big short position also drives the stock down for everyday investors.”
Musk has repeatedly blamed short sellers for manipulating Tesla’s share price lower. But the ongoing prominence of short interest highlights that many investors continue to bet against the EV maker’s lofty valuation.
While Tesla has disrupted the auto industry and holds ambitious long-term goals, critics argue the current stock price of around $900 per share discounts overly optimistic assumptions about growth and future profit potential.
Short interest in Tesla reached nearly 8% of total shares outstanding in February, according to Hazeltree. On an absolute basis, Tesla shorts amounted to over $25 billion in short interest.
To put that in context, short interest against Apple totaled under $20 billion despite its much larger market capitalization. This indicates the sheer scale of bearish positioning targeting Tesla specifically.
With nearly one in twelve Tesla shares shorted, pessimists see ample downside even after the stock’s pullback from all-time highs above $400 per share reached last year. But traders attempting to time short entries have also felt pain during Tesla’s bigger uptrend.
On Monday, the tug-of-war between bulls and bears continued, with Tesla stock surging 10% on a positive analyst report. Morgan Stanley dramatically boosted its Tesla price target, citing long-term potential from the company’s Dojo supercomputer system.
The bank argues Dojo could enable software and services revenue that unlocks new addressable markets beyond automotive. Morgan Stanley now sees Tesla shares reaching $1,300, over 40% above current levels.
“The same forces that have driven AWS to reach 70% of Amazon total EBIT can work at Tesla, in our view, opening up new addressable markets that extend well beyond selling vehicles at a fixed price,” according to analyst Adam Jonas.
Other Tesla observers have highlighted Dojo and the company’s data edge as differentiating strengths. Through over 1 million vehicles on the road, Tesla can refine autonomous technology and offer differentiated software services.
But risks around the pace of adoption for offerings like Full Self Driving continue to divide opinions on Wall Street. Bears expect headwinds as EV competition ramps up.
While Tesla faces doubters, its continued lead as the most shorted stock highlights intense polarization around its disruptive potential. The name trades at a hefty valuation, but also boasts a track record of triumphing over skeptics.
Looking ahead, Tesla’s ability to expand beyond hardware into higher-margin software and services will be key to justifying today’s lofty price tag. Results from the buildout of Dojo over the next several years may hold the key to definitively shifting perceptions.
In the meantime, short sellers will likely continue targeting Tesla as a battleground stock. Musk regularly takes shots at short sellers on social media for betting against his company.
With Tesla maintaining pole position as the most shorted name this year, the ongoing war between bulls and bears shows no signs of abating. Traders on both sides see strong conviction around the stock’s future direction.
But while short interest sits near record levels, Tesla continues to disrupt industries and expand production. Those banking on a collapse may find the road ahead bumpy should Tesla bulls get the last laugh.