Tesla Overtakes Apple As Most-Shorted US Stock

Tesla Inc. (TSLA) is once again investors' favorite short ahead of Apple Inc. (AAPL), according to a report from financial analytics firm S3 Partners. As the electric car maker faces road blocks in reaching production targets for its first mass market vehicle, the Model 3 sedan, more investors are betting against the stock and its outspoken Chief Executive Officer (CEO) Elon Musk. (See also: China’s Stance on Tariffs Would Boost Tesla Most.)

Bears Bet Against Musk and the Model 3

In just the past month, the number of Tesla's shares shorted jumped by 7.7 million shares, or 28%, as short interest increased to a whopping $10.7 billion, according to the report. Data from FactSet indicates that more than 25% of Tesla's available stock is currently sold short.

The Palo Alto, Calif.-based auto maker has long polarized investors, as S3 Partners notes. Tesla only briefly lost its standing as the number one U.S. equity short in the recent months, maintaining this position since March 2016.

"Tesla short sellers, after reducing their short exposure for the first two months of 2018, have reversed course and shorted Tesla stock heavily over the last five weeks," read the April 11 report.

Those betting against Musk's EV market pioneer have incurred a slight loss year-to-date (YTD), down $58 million in mark-to-market losses. Short sellers made back all of their early YTD losses with a $2.2 billion profit in March, followed by a $1.3 billion mark-to-market loss thus far in April, wrote S3 Partners.

Tesla short interest reached a 2018 high of $11.1 billion on January 17. As sentiment improved, just two weeks after the stock rose to a YTD record of $357.42 per share in February, shares shorted fell to a 2018 low of 27.5 million shares on March 6, with short interest down to $9 billion. As the stock has dropped nearly 16% since reaching highs in February, short exposure has remained over the $9 billion mark, spiking in the recent period as investors geared up for the firm's highly anticipated quarterly report.

Earlier this month, TSLA spiked on Musk's highly anticipated update regarding Model 3 production progress. While the firm missed its targets once again, progress appeased investors as the company expects a "rapid" ramp up in 2018 to reach as many as 5,000 vehicles per week by year-end.

Closing down 1.2% on Wednesday at $300.93, TSLA reflects a 3.4% decline YTD, underperforming the broader S&P 500's 1.2% dip over the same period. Shares of the EV leader have fallen about 23% from their 52-week high of $389.61 reached in June.

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