Tesla stock skyrockets after legendary short seller goes long

Tesla Inc. stock rallied more than 9% Tuesday after famed short seller Citron Research turned long on it, saying that the Model 3 is “a proven hit” and that many of the “warning signs” about the Silicon Valley car maker have proven to be insignificant.

Tesla shares TSLA, +10.79% traded as high as $288.80, their highest since Oct. 4, and were the second best performer on the Nasdaq-100.

Citron’s note comes after the Silicon Valley car maker announced late Monday that it will report third-quarter results on Wednesday, much sooner than anticipated.

The short seller had long held that by the time of the Model 3’s arrival, “multiple” 200-mile range electric vehicles would have been on the market, it said Tuesday.

“Rumors of the Tesla killers have been as constant and unfounded as Bob Lutz’s call for Tesla’s bankruptcy,” Citron said, taking a jab at the former General Motors Co. GM, +1.69% executive and frequent Tesla critic.

In March, it predicted the stock would fall to $100 by year’s end. Citron’s Andrew Left is also among the several investors and short sellers who have filed class-action lawsuits against Tesla for alleged securities law violations stemming from Chief Executive Elon Musk’s going-private tweets in August.

In its Tuesday note, however, Citron said that while “the media has been focused on Elon Musk’s eccentric, outlandish and at times offensive behavior, it has failed to notice the legitimate disruption of the auto industry that is currently being DOMINATED by Tesla,” using all caps.

Citron acknowledged its long-held bearish view on Tesla and its surprising turn: “As much as you can’t believe you are reading this, we can’t believe we are writing this!”

But, “plain and simple -- Tesla is destroying the competition,” it said. “It looks like it is the competition that is taking the Ambien,” referring to Musk’s admission that he sometimes uses the sleeping pill.

On Twitter, the short seller also said that the early earnings might be a “bad sign” for shorts.

Tesla surprised markets on Monday by setting the date for its third-quarter results about two weeks earlier than its usual date. Tesla did not return a request for comment from MarketWatch late Monday about the decision to fast-forward earnings with little notice.

Musk has vowed to show profits in the third and fourth quarters.

Analysts polled by FactSet expect Tesla to report an adjusted loss of 3 cents a share on sales of $6.01 billion. That would compare with an adjusted loss of $2.92 a share on sales of $2.99 billion in the year-ago period.

Tesla scheduled a post-results call with analysts at 3:30 p.m. Pacific, about one hour later than usual. Ford Motor Co. is also scheduled to report after the bell on Wednesday.

Third-quarter results arrive nearly three weeks after Musk took swipes at the Securities and Exchange Commission and at short sellers by calling the SEC the “Shortseller Enrichment Commission.”

Last week, a federal judge approved Musk’s settlement with the SEC reached last month to end charges that Musk misled investors and violated securities laws by tweeting he had “funding secured” to take Tesla private. Musk and Tesla agreed to the settlement without admitting or denying the allegations.

Tesla shares have lost 11% this year and 18% in the last 12 months. That compares with gains of 1.4% and 0.9% for the S&P 500 index SPX, -1.19% and the Dow Jones Industrial Average DJIA, -1.07% in the same period.

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