The UAW is asking.
A new report from short-selling research firm S3 Partners shows just how much money is being bet on automotive stocks.
Short sellers borrow and sell stock they don’t own, hoping the price will drop and then buy it back at a lower price. Short selling is a bearish bet.
According to S3, short sellers borrowed and sold $22 billion worth of Tesla (ticker: TSLA) stock. That’s about 10 times the second-shortest car inventory.
Rivian Automotive
(RIVN) Ford (F) was the third to be borrowed and sold by bears.
The other two are Detroit-Three automakers, General Motors (GM) and
Stellar
(STLA), mark seven and 10 on the shortest list.
It’s no mystery why Tesla is so favored by short bears. The stock trades at roughly 58 times earnings in 2024. of
S&P 500
tradies about 18.4 times. Ford trades at 6.6 times. High valuations, whether on an absolute basis or relative to other companies in the industry, are often a starting point for bear investors.
The total amount of money borrowed and sold is a measure of short selling activity. it’s good. It represents how much short sellers are at risk. Another measure is the number of shares sold short relative to the total number of shares available for trading. That number is commonly called short interest.
About 3% of Tesla stock available for trading is sold short. Average short interest in the S&P 500 is around 2%. Tesla’s short demand is not above average, but it can’t really be that high. Tesla’s market capitalization is approximately $830 billion. Short sellers don’t have that much capital.
Short interest for Ford, GM, and Stellantis is 4%, 2%, and 2%, respectively. Even with the UAW strike, average short interest isn’t that high for traditional automaker stocks.
Short interest in EV startups is highest among auto stocks. Short interest b
Fisker
(FSR) is 43%. According to S3, this is the maximum.
Lucid
(LCID) is number two on that scale, with short interest of 23%.
Nicola
(NKLA) and Rivain come in at about 21% and 13%.
Fisker, Lucid, Nicola and Rivian are not yet profitable and do not generate free cash flow. The position of bearish investors shows that not all believe EV startups will make it to the start.
High short interest can introduce a lot of trading volatility. A short squeeze is basically when all the short sellers rush to cover bearish bets at once, driving the stock price higher than expected based on fundamentals alone.
For example, Nicola’s stock rose almost 34% on Monday
Nasdaq Composite
It was flat and the S&P 500 rose just 0.1%. Moreover, shares have risen nearly 80% in the past five days. During that time, the company announced a new COO and said it would start delivering fuel cell cars in a few weeks. Both are positive things, but 80% is a big step.
Write to Al Root at [email protected]
