Tesla's short-sellers may be in for "short squeeze nightmare." | Paragon Alpha

Tesla's short-sellers may be in for "short squeeze nightmare."

By Matea Gucec

Investors who bet against the electric vehicle (EV) manufacturer lost $1 billion last week and may be in "short squeeze hell," according to a report by Businesses Insider. Tesla may be the most shorted company in the world.

Following the company's announcement that Q2 profit expectations had been exceeded, Tesla shares increased 10% on Thursday, forcing some investors to cover their loss wagers by purchasing Tesla stock.

The company's CEO, Elon Musk, stated during the company's second-quarter earnings call that it has "the potential for a record-breaking second half of the year," according to a note published by short-selling research firm S3 Partners, which is cited in the report as saying that a "short squeeze hell" is possible for Tesla.

According to S3 Partners, Tesla's short interest presently has a notional value of $18.5 billion, and hedge funds continue to hold the company as their ninth most popular long position. These factors could contribute to a momentum-driven surge as short-sellers scramble to close out their positions.

Despite having recovered 30% from its June low, Tesla stock is still down 23% for the year.

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