GameStop skyrocketed to prominence this year after commentators on the Reddit r / wallstreetbets forum helped increase the fighter video store’s inventory almost tenfold in a week. The Reddit crowd was trying to combat the huge interest of short sellers on GameStop, who borrow shares and sell them in the hope of repurchasing them at a lower price later and making a profit.
If the price of a stock goes up, the investors who sold it are in danger of potentially unlimited losses, and GameStop’s irrational recovery forced those who bet against their shares to cover their losses. At least one hedge fund, Melvin Capital, lost 53% of its fund in January alone, needing an emergency $ 2.8 billion bailout, while several others lost between 10% and 30%. Since then, GameStop has become an abbreviation for small investors who are “pressured” as they struggle to cover their losses.
But before GameStop, there was Tesla. The electric carmaker has been the biggest target of investors – and the most painful bet – since at least 2010, according to S3 Partners, a technology and financial analysis company. Between 2017 and 2021, investors shorting Tesla lost $ 52 billion; when returning to 2010, the number is close to US $ 57 billion. GameStop short sellers, on the other hand, lost about $ 9 billion, according to US stock market data analyzed by S3.
This makes Tesla the worst-performing domestic short-run operation in the past decade or so, according to Ihor Dusaniwsky, managing director at S3 Partners. Tesla’s share price has increased 15-fold since 2017.
But all of this has hardly dampened investors’ appetite for betting against Tesla. The electric car maker remains one of the best selling companies in the world, with $ 39 billion in short short positions (the value of short shares with positions not yet closed or covered), representing 6% of the total shares available for negotiation (below 20% in 2020). This is three times more than short positions against Apple, its closest competitor.
There is a saying popularized in Silicon Valley by fellow billionaire Peter Thiel: “Never bet against Elon Musk”, Tesla’s chief executive. But for Wall Street, there is always money to be made (and lost) by betting against Tesla’s success.