Finance | December 31, 2020 10:33 am

Investors Who Bet Against Tesla Lost $38 Billion This Year. Yes, Billion.

Elon Musk gets the upper hand against short sellers

Elon Musk thumbs up
Tesla CEO Elon Musk attends the Axel Springer Awards ceremony in Berlin on December 1.
BRITTA PEDERSEN/POOL/AFP via Getty Images

In The Princess Bride, Wallace Shawn’s character Vizzini describes two classic blunders (never get involved in a land war in Asia, and never go against a Sicilian when death is on the line), but if he were to extrapolate that category for 2020 he’d surely add this: never short sell Tesla stock. 

As we close out a banner year for Elon Musk’s electric vehicle company, Bloomberg reports that Tesla short sellers — essentially investors who bet against Tesla — lost an unheard of $38 billion in 2020. 

Ihor Dusaniwsky, managing director at S3 Partners, a financial tech company, told the outlet that it’s “not only the largest mark-to-market loss for any stock this year, it is the largest yearly mark-to-market loss [he has] ever seen.”

“The big thing about Tesla as opposed to any other stock is that the vast majority of retail shareholders will never be sellers,” Dusaniwsky said. “They love the stock, they love the car, they love Elon Musk and they are adamant long shareholders.”

The rabid fanbase isn’t the only reason Tesla stock has gone up over 730% in value this year, to the chagrin of those who sell the stock hoping it will decrease in value before they buy it again. As Brad Gastwirth, chief technology strategist at Wedbush Securities, explained to us earlier this year: “I’ve always looked at companies and stock as: valuation alone is never a reason to buy or sell any stock … You have to look at: Is their trajectory still in the beginning? Is there still significant room to execute what you want and disrupt? And are there other tangential markets that they can go into? All of those answers are yes. So to me [Tesla is] ridiculously valued, but until they have a change and a disruption in fundamentals, it’s not going to reverse in my opinion.”

And despite a few dips and bumps along the way, the stock valuation hasn’t reversed. Just click over to the one year timeline.

According to Bloomberg, respected investment manager and Tesla short seller Jim Chanos described this year as “painful,” and looking at that graph, if we were in his position, that would be putting it lightly.

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