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You Better Be Ready to Pony Up if You Want to Short Tesla

FIS' Astec Analytics provides its clients with intra-day short-selling market data every week.

Two stocks that that saw plenty of short-selling activity this week were BYD Company Limited (HKG:1211) and Tesla Motors Inc TSLA.


Tesla had been burning though substantial amounts of cash to fund its constant R&D activities. Last year, the electric car maker lost $889 million, keeping just $1.1 billion in cash.

However, some of its investments seem to have paid off. The new Tesla 3 is already a success, with pre-orders surpassing 325,000 vehicles. Given that each pre-order implies a $1,000 deposit, Tesla’s cash pile spiked by around 30 percent. This increases the company’s “chance of shipping some completed Tesla 3 cars in about two years."

Tesla had seen short interest decline roughly 10 percent over the prior week. However, over the past week, it has rebounded about 6 percent, driven by the recent gains in the stock, which have led many investors to believe the shares are once again overvalued.

BYD Company

Similar to Tesla, Chinese BYD is a manufacturer of automobiles and rechargeable batteries. Many analysts also conceive the company as a main piece in the government’s pollution reduction plan.

BYD has repeatedly appeared in Astec’s hot stocks list “as government subsidies have been cut and demand has struggled to gain traction as green energy cars were largely reliant on electricity provided by coal fired power stations, suggesting that these vehicles were actually increasing pollution, not decreasing it."

Borrow volumes, seen as a proxy for short interest, are usually quite high for BYD; in fact, levels have usually stood above 80 percent of the available supply this year. Despite the elevated volatility, the stock lost 30 percent of its value over the past year.

“Short sellers have remained relatively static since the start of 2016, with volumes only growing or shrinking within a few percentage points, suggesting that the recovery back over HK$40 may fall flat,” Astec’s report concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

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