Investors betting that Tesla Inc. stock will fall appear to be having the last laugh, at least for now.

Tesla TSLA, +3.76% short sellers are up $1.2 billion in paper gains since the day Chief Executive Elon Musk tweeted he was “considering” taking the company private at $420 and funding was “secured,” S3 Partners LLC, which tracks real-time short interest data, said in a note Friday.

Musk shocked markets with that tweet on Aug. 7, the first of many that day and which was followed by an email to employees explaining his reasons for wanting to take Tesla private. That day the shorts got walloped.

The tweet has sparked a U.S. Securities and Exchange Commission probe and doubts have grown around the funding to cinch a going-private deal.

Tesla shares are off 20% since the $379.57 close on Aug. 7, including a 9% loss Friday on the heels of an interview on the New York Times in which Musk describes his “excruciating year” and blamed short sellers for much of his stress.

“Unfortunately for Elon Musk and the scores of Tesla retail and institutional long shareholders, the anticipated short squeeze resulting from Tesla’s march to $420/share never materialized,” S3 Partners LLC, which tracks real-time short interest data, said in a note Friday.

Tesla has about $11.2 billion in short-seller interest, behind only Alibaba Group Holding Ltd. BABA, -0.66%

Short sellers bank on a stock falling in price. They then borrow the shares to sell them, hoping they can later pick them up at a lower price, return them to the original lender and pocket the difference.

There has been some short covering since the Aug. 7 tweet, but only about 4% of the Tesla short sellers have been driven away, S3 Partners said in the note.

Read more:Elon Musk left plenty of questions about Tesla going private, experts say

“Shorts have only covered 1.3 million shares since Tesla’s original stock price spike, hardly a short squeeze and more likely an exit by shorter term momentum short sellers and fat-trimming by the lesser capitalized long-term short sellers,” the note said. “In actuality, many of the longer-term short sellers have backed up their bets and slightly increased their short exposure over the last week.”

Short sellers “are under no impetus to cover their positions” unless Musk can get more traction and the stock heads back toward the $420 mentioned, the note said.

“With ample stock available to borrow and stock costs easing slightly to below 2.50% fee levels, there is more than enough stock to short at a reasonable cost basis. If Tesla’s stock price continues to slide we may see additional shares shorted and total shorts reach the 40 million share levels we saw in May.”

In the Times interview, Musk said he had no regrets about saying “funding secured” in the tweet. According to the newspaper, efforts are under way to find a second-in-command who could take off some of the strain on Musk.