Tesla stock fell 9% on Thursday, adding to short sellers' year-to-date gains of $15 billion.
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Short sellers betting against Elon Musk and Tesla are having a banner year, according to a Wednesday research note from S3 Partners.
The firm said that Tesla is the most profitable short trade of 2022, with traders bagging $15 billion in mark-to-market profits year-to-date.
The bulk of those profits, $13.7 billion, have been made since Musk's proposal in April to acquire Twitter. That fact challenges Musk's view that much of Tesla's stock price decline can be attributed to the Federal Reserve's rate hikes, which had only just started in March, rather than his recent purchase of Twitter.
In December alone, Tesla shorts are up $4.5 billion. Tesla stock fell 9% on Thursday, so those short seller gains are accelerating.
"Short sellers have been backing up their TSLA short exposure for good reason, it is the most profitable short, in dollar value, of 2022," S3 managing director Ihor Dusaniwsky said.
And the bearish traders are not letting up against their Tesla trade. Even in the last month, Tesla stock saw a jump in short interest with 3.78 million new shares shorted, according to the note.
"Since Elon Musk announced his Twitter bid on April 14th, short sellers have hit overdrive with 8.18 million shares of additional short selling, worth $1.13 billion," Dusaniwsky said.
Part of what makes Tesla so volatile is that passive shareholders make up just 36% of the EV maker's shareholder base, he noted. That's compared to 50% at Apple and 58% at Microsoft.
"The greater the percentage of active long shareholders the more trading volatility and price volatility in a stock," Dusaniwsky said. That volatility only compounds when the stock is one of the most shorted companies in the market.
