Tesla

Tesla short-sellers were down $2.5 billion in mark-to-market losses on Monday as the stock spiked as much as 20%, according to a note from financial-analytics firm S3 Partners.

That brings the 2020 year-to-date mark-to-market losses for Tesla short-sellers to $8.31 billion.

"While we are seeing some momentum short sellers increasing their positions in anticipation of a short-term pullback, we should see an increase of short covering due to this $700/share level squeeze," said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

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Tesla short-sellers, or traders betting that the Elon Musk-led automaker's shares will decline, are feeling the heat Monday.

Short-seller mark-to-market losses reached $2.5 billion in just one day as Tesla's stock surged to new highs, according to a Monday note from Ihor Dusaniwsky, managing director of predictive analytics at financial-analytics firm S3 Partners. At one point, the stock traded up 20%, the biggest one-day gain for the equity since 2013, according to Bloomberg data.

That brings the 2020 year-to-date mark-to-market losses for Tesla short-sellers to $8.31 billion, according to S3 data. That's nearly three times greater than short-seller losses in 2019, which were about $2.9 billion mark-to-market at the year end.

As short-seller losses mount, all eyes are watching for a dramatic "short squeeze," which is when a stock gains so rapidly that traders betting against it are forced to cover short positions, sometimes sending the stock price even higher.

But that might not happen for Tesla, according to Dusaniwsky. "It is more likely to be a continuous slow decline in shares shorted rather than a sudden abrupt plunge," he wrote. This is because of the amount of short hedging being done to offset Tesla convertible bond and option exposure, according to the note.

"While we are seeing some momentum short sellers increasing their positions in anticipation of a short-term pullback, we should see an increase of short covering due to this $700/share level squeeze," Dusaniwsky said.

Tesla's stock is surging on a slew of good news. On Wednesday, the company reported fiscal fourth-quarter 2019 financial results that beat analyst expectations, continuing a stock rally that's sent the share price up more than 155% since October 2019.

On Monday, shares continued to gain when Bill Selesky of Argus Research increased his Tesla price target to $808 from $556, making it the highest estimate on Wall Street. In addition, Panasonic Corp. said on Monday that the battery business it runs jointly with Tesla turned a profit in the quarter ending December 31, further fueling the automaker's rally.

Tesla has gained 56% year-to-date through Friday's close.

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