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Shares of Tesla (TSLA) are down more than -7% today at a new 2-year low and have fallen more than -66% this year. The latest news causing Tesla weakness was today’s report from Reuters that the company plans to slow vehicle production output at its Shanghai factory in the first half of January and stop production altogether at the plant the last week of January for the Chinese New Year holidays.
Analysis from S3 Partners showed that investors made more than $15 billion betting that shares of Tesla stock would fall this year, the most profitable short position of the mega-cap tech stocks in 2022. The value of Tesla has sunk by almost 70% from its November 2021 record high of $1.24 trillion down to under $385 billion today. About 3% of Tesla shares are being shorted, making it the second-largest U.S. shorted stock after Apple (AAPL).
Tesla CEO Musk has sold $3.6 billion of his company’s stock this year to fund operations of his newly acquired Twitter and said last week that he wouldn’t sell any more Tesla stock for at least 18 months. Musk’s bankers are considering replacing some of the high-interest debt he used for his Twitter purchase with new margin loans backed by Tesla stock that he would be personally responsible for re-paying. An SEC filing in April showed Musk had 92 million Tesla shares pledged as collateral.
The banks have been unable to find buyers for Musk’s Twitter debt and are facing the prospect of realizing steep losses. The financing discussions have focused on how to replace $3 billion of unsecured debt on which Twitter pays an interest rate of 11.75%, the maximum banks had guaranteed Musk when they agreed to finance his acquisition of Twitter in April. Twitter is faced with annual interest costs of about $1.2 billion based on the current debt structure, more than a measure of the company’s earnings for the whole of 2021.
This year’s decline in Tesla’s stock price has outpaced that of the broader market, and the company is on pace for its worst annual performance on record. Rising interest rates and global economic uncertainty have stoked concern that demand for new vehicles might weaken, weighing on the price of Tesla’s shares. Tesla has cut prices in China this fall for its cars, and in the U.S., it is offering buyers of certain electric vehicles a $7,500 credit and 10,000 miles of free charging if they agree to take delivery this month. CEO Musk has floated the idea that Tesla could buy back $5 billion to $10 billion of some of its stock for the first time next year but then cautioned last week that it would be unwise to buy back shares and then end up in a severe recession.
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On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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