Hedge funds that bet against Tesla have been hit hard by a substantial rally in the company's share price, with 18% of over 500 hedge funds tracked by Hazeltree holding short positions in Tesla by the end of June, up from 15% at the end of March, according to a report by Bloomberg.
The short positions, the highest seen in over a year, became a significant liability following Tesla's 2 July announcement of Q2 vehicle sales, which despite a decline, exceeded analyst expectations, prompting a surge in investor confidence. Tesla’s stock price has since soared by about 40% since the beginning of June, reaching a six-month high.
The report cites Seth Goldstein of Morningstar as predicting that Tesla’s profit margins will improve due to reduced production and raw material costs, and that the company will return to profit growth next year. However, he also notes that Tesla’s success will heavily depend on its approach to the increasingly competitive market for affordable electric vehicles.
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