These critics, with whom Musk has had a really harsh, very public confrontation over time, stood to make a wholesome return if Tesla shares dropped in worth, however risked huge losses if the inventory continued to achieve.
The $40.1 billion in losses by buyers shorting Tesla shares have been not like the losses weathered by another firms’ brief buyers — final yr or ever — in line with Ihor Dusaniwsky, managing director at S3 and an knowledgeable within the topic.
Most of the shorts have been compelled to confess defeat final yr. About two-thirds of the brief positions have been unwound throughout 2020, which in itself was an element that helped drive Tesla shares greater, because the brief buyers have been compelled to purchase higher-priced shares to exit their positions.
“It was a delicate tail wind in Tesla’s worth transfer all yr lengthy,” stated Dusaniwsky.
However the yr ended with brief buyers nonetheless holding roughly 5.5% of Tesla’s shares, which equates to a $31 billion guess towards the corporate’s future prospects. For comparability, there may be $13.three billion and $10.2 billion presently guess towards Apple and Amazon respectively, with shorts controlling lower than 1% of every of these firms’ shares.
Musk’s very profitable yr
Musk has often battled with brief sellers, taking pictures at them on Twitter and in public feedback. However past any pleasure he is feeling from their losses final yr, their collective ache would not examine to his personal private features.
Musk’s stake of 170 million shares elevated in worth by a whopping $106 billion in 2020, and that is solely a portion of the features he earned from Tesla’s efficiency. He got here into the yr with choices to purchase one other 22.9 million shares, when adjusted for the corporate’s five-for-one inventory break up. These choices elevated in worth by $14.2 billion.
And he is poised to qualify to get one other two tranches of choices to purchase a further 16.9 million shares someday early this yr, given the corporate’s current monetary and market efficiency. These extra choices could be price $10.7 billion based mostly on the year-end inventory worth.
All informed, Musk ought to quickly management sufficient choices to purchase one other 73.5 million shares of Tesla at a median worth of about $50 a share. It’s presently buying and selling above $700.
Musk has but to train any of the choices he now holds, which isn’t uncommon. Executives granted inventory choices not often train them till they’re able to promote the shares, or the choices are about to run out.