A research firm, S3 Partners, reported on Wednesday that short sellers of Tesla have made $2.16 billion in profits from mark-to-market for the month of April.
However, short sellers are still experiencing $5.52 billion in mark-to-market losses for the year so far.
The term mark-to-market means calculating the current value of an asset or liability based on its current market price.
According to Reuters, the release of this report was before the automaker’s quarterly results, which were scheduled to be disclosed after the close of trading for the day.
Before the announcement of its quarterly report, Tesla’s shares were down by approximately one per cent.
Investors were specifically concerned about margins after the company reduced the prices of its electric cars in the U.S for the sixth time this year.
S3 Partners analysts said in a note, “Recent TSLA short covering may be an indication that some short sellers think that TSLA’s profit margins will stay in the 20% range, and trimmed their exposure to lock in some of April’s mark-to-market profits in the anticipation of a stock price rally.”
Tesla is the second most shorted company in the US, after Apple, with short interest of $15.42 billion and 83.65 million shares being shorted.
When a stock is shorted, the sellers are essentially betting that the stock price will fall. If the price of the stock does fall, the short seller can buy the stock back at a lower price and make a profit by pocketing the difference.
This means, people who had shorted Tesla’s stock saw an increase in their profits during the month of April.
