Tesla short-sellers left licking their wounds

Short-sellers of Tesla stock have been caught out by the carmaker's surprise share-price bounce.

Tesla chief Elon Musk © MARK RALSTON/AFP/Getty Images

Elon Musk
(Image credit: Tesla chief Elon Musk © MARK RALSTON/AFP/Getty Images)

Last week brought some good news for shareholders in electric car maker Tesla finally, says Antony Currie for Breakingviews. The company made "an unexpected, if small, profit of $143m" in its third quarter, driven by a fall in both general costs and those related to sales. The good news was also accompanied by reports of an "all-round improvement" at the "troubled" SolarCity solar-panel franchise. The results led many traders to bet that chief executive Elon Musk (pictured) "is finally getting on track" Tesla's share price surged 20% on the news.

Tesla bulls have "much to celebrate", says Jamie Powell in the Financial Times. As well as the profits, the firm is demonstrating "impressive cost control" and may bring forward the launch of its Model Y car. However, "Tesla cynics" also have a point. Revenues actually fell year-on-year and much of the profit-margin improvement was driven by "aggressive working capital management" it is still heavily dependent on the "regulatory credit gravy train". So while the short-sellers may be licking their wounds,"total capitulation from either side still feels like a long way away".

Persistent problems include "a debt load of around $11bn, sales boosted by government subsidies to buyers and consistently missed production forecasts", says Paul Vigna in The Wall Street Journal. Still, these results suggest that Tesla "is finally ready to stand on its own four wheels" as it moves towards becoming self-funding. Certainly, short-sellers seem to be in retreat the percentage of stock shorted is down to 20%, from 24% in June and a "vicious" 60% seven years ago.

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Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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