Tesla Left a Big Hole in Short Sellers’ Pockets. It’s SpaceX’s Turn Now.

Earlier this month, Elon Musk’s rocket company, SpaceX (SPCX), which has also pitched itself as an artificial intelligence (AI) play, went public. It was the biggest IPO ever, and the post-listing rally made Musk the world’s first trillionaire.

The euphoria has since cooled off, and SPCX stock has plunged from its highs. Not only has Musk lost his trillionaire status, but many investors, particularly his fans who bought the shares post-listing in a FOMO trade, have lost money, at least on paper.

SpaceX’s Short Interest Climbs 

Shorts seem to be fancying their chances, and according to data from Ortex Technologies, SPCX’s short interest has risen to double digits. The data and analytics company’s co-founder, Peter Hillerberg, told Reuters, “Short interest in SpaceX is building remarkably ​fast for a stock that has only been public a couple of weeks.” Pointing to the steep rise in SpaceX’s short interest, he added, “A jump like this is a clear sign that a ​growing number of traders are positioning for the price to fall sharply.”

Elon Musk Versus Short Sellers

Short sellers have long bet against Elon Musk, a controversial and deeply polarizing personality. So far, shorts have only had Tesla (TSLA) as a listed play against Musk. Just as Musk fans now have a purer play on the world’s richest person, even shorts have another instrument in their arsenal.

Musk has a history of taking on shorts head-on, and in 2020, he mocked them by selling red satin shorts and sending a box of shorts to David Einhorn, a prominent Tesla bear. Incidentally, 2020 was Tesla’s best year ever, and the stock skyrocketed by over 740%. Musk has also clashed with Jim Chanos, who was short Tesla, and confronted Bill Gates for shorting the stock while trying to seek climate-change philanthropy from him.

Musk, who believes short selling should be “illegal,” has labeled the Securities and Exchange Commission (SEC) as the “Shortseller Enrichment Commission” amid frequent run-ins with the regulator.

Tesla Is Consistently Among the Most Shorted Stocks

Meanwhile, Tesla is consistently among the most shorted stocks, and not without a reason. The company’s valuation has been a conundrum, and while bulls see it as a tech (and now AI) company and therefore deserving of premium valuations, bears predominantly see it as an automaker. Worse, Tesla’s vehicle sales have fallen yearly for two consecutive years, and 2026 could be no different. The company’s once fat operating margins have also eroded amid the price war in the electric vehicle (EV) industry.

While many bulls see Tesla as a play on future products, namely robotaxis and Optimus humanoid robots, the company’s track record on meeting timelines for new products has been dismal at best. From projecting about a million robotaxis by 2020 and those perennial talks of Tesla reaching full autonomy by the “end of the year,” Musk has made some bold predictions that the company missed. We are not even talking about the 50% annualized delivery growth and 20 million vehicle deliveries in 2030, which Musk once touted, but the company quietly withdrew the latter from its impact report.

A sagging core EV business, valuations that are quite stretched by established standards, and a history of overpromising and under-delivering make Tesla a prime candidate for shorting. However, shorting Tesla hasn't really paid off in aggregate, even though bears have scored wins intermittently. While we don’t have credible data on cumulative losses, it should be in the multi-billions, including a $40 billion loss in 2020 alone.

Shorting Tesla is a risky exercise for two reasons. The first is, of course, the huge army of Musk fanatics that typically buy the dips in the stock. The second is TSLA’s propensity to move on non-fundamental factors, in particular Musk’s social media activity, which can trigger massive swings in the stock.

Would SpaceX Also Be a Short-Seller Killer?

While these are early days, we can be reasonably sure that SpaceX would be among the most shorted stocks given its high valuations. However, SPCX shorts would need to brace for higher volatility, which can then trigger short squeezes. It does not help that the stock has a much lower free float compared to Tesla. SpaceX might also be a play on what many see as an AI bubble, and given the massive volatility in AI plays, shorting the stock would carry its own set of risks.