Tesla: The O.G. of automotive shorts
10 June 2025
With years of mixed earnings and a 'Marmite' CEO, Matt Chessum, director of securities finance at S&P Global Market Intelligence, looks at short selling activity in the world's most famous electric vehicle maker
Image: Shutterstock
Over the past decade, few stocks have drawn more attention from short sellers than Tesla. At various points, it ranked as the most heavily shorted stock in the US market, not because it was an obscure or misunderstood company, but because many believed the fundamentals did not support its soaring valuation. What followed was one of the most closely watched and costly chapters in modern equity markets. Today, Tesla holds a distinct place in market history as the original high-profile automotive short of the 21st Century.
In the early 2010s, Tesla appeared to be a textbook short candidate. It was operating in one of the most capital-intensive industries in the world, posting consistent losses, and led by a CEO who was viewed by many as more visionary than operator. Incumbent automakers had scale, experience, and global supply chains. Tesla, by comparison, had a single model in production, persistent manufacturing issues, and a business model that required substantial ongoing investment.
By 2018, bearish bets on Tesla had grown substantially. Hedge funds and analysts issued detailed cases against the company, citing weak margins, missed targets, and concerns about cash burn. A common view among critics was that Tesla’s market capitalisation was out of step with its actual financial performance and that the company would struggle to compete once traditional automakers entered the electric vehicle market at scale.
Despite this, Tesla continued to execute. Between 2019 and 2021, the company resolved key production challenges and began posting consecutive profitable quarters. Expansion in China was faster than expected, and progress on new facilities in Europe and Texas reinforced the view that Tesla was becoming a global player. Operational improvements helped support higher deliveries and margins, giving more credibility to the company’s long-term roadmap.
During this same period, investor sentiment around Tesla began to shift. The company attracted significant interest from retail investors, many of whom viewed it as more than just a carmaker. Tesla’s positioning at the intersection of energy, transportation, and software helped it build a loyal following among individual investors, some of whom saw the company as a long-term bet on structural change across multiple industries.
In 2020, the stock’s performance caught even seasoned market participants by surprise. Tesla’s share price rose more than 700 per cent that year alone, and it was added to the S&P 500 by year-end. This move dealt a major blow to short sellers, many of whom had been holding their positions for years. Losses were steep with some estimates putting the total above US$30 billion and several funds exited their trades under pressure.
What happened with Tesla has had a lasting impact on how short-selling risk is perceived. The episode challenged traditional valuation models and highlighted the influence of investor sentiment, retail participation, and narrative-driven investing. It also underscored the importance of timing and risk management when shorting high-volatility, high-conviction stocks.
Tesla remains a divisive name. Some investors view it as a platform company with potential well beyond the automotive sector, including energy storage, AI, and autonomous systems. Others continue to question the sustainability of its margins, its governance practices, and the increasing competition in the electric vehicle space. Yet regardless of one’s outlook, Tesla’s role in reshaping how the market approaches short interest and price discovery is difficult to ignore.
Tesla (TSLA) Exchange Short Forecast as a % of Freefloat
The Tesla short was never just about balance sheets or earnings reports. It became a broader test of conviction in a company, a CEO, and a story that did not fit the traditional mould. In hindsight, it offered clear lessons about how markets behave when belief, scale, and momentum collide and what can happen when too many investors are positioned the same way.
In the early 2010s, Tesla appeared to be a textbook short candidate. It was operating in one of the most capital-intensive industries in the world, posting consistent losses, and led by a CEO who was viewed by many as more visionary than operator. Incumbent automakers had scale, experience, and global supply chains. Tesla, by comparison, had a single model in production, persistent manufacturing issues, and a business model that required substantial ongoing investment.
By 2018, bearish bets on Tesla had grown substantially. Hedge funds and analysts issued detailed cases against the company, citing weak margins, missed targets, and concerns about cash burn. A common view among critics was that Tesla’s market capitalisation was out of step with its actual financial performance and that the company would struggle to compete once traditional automakers entered the electric vehicle market at scale.
Despite this, Tesla continued to execute. Between 2019 and 2021, the company resolved key production challenges and began posting consecutive profitable quarters. Expansion in China was faster than expected, and progress on new facilities in Europe and Texas reinforced the view that Tesla was becoming a global player. Operational improvements helped support higher deliveries and margins, giving more credibility to the company’s long-term roadmap.
During this same period, investor sentiment around Tesla began to shift. The company attracted significant interest from retail investors, many of whom viewed it as more than just a carmaker. Tesla’s positioning at the intersection of energy, transportation, and software helped it build a loyal following among individual investors, some of whom saw the company as a long-term bet on structural change across multiple industries.
In 2020, the stock’s performance caught even seasoned market participants by surprise. Tesla’s share price rose more than 700 per cent that year alone, and it was added to the S&P 500 by year-end. This move dealt a major blow to short sellers, many of whom had been holding their positions for years. Losses were steep with some estimates putting the total above US$30 billion and several funds exited their trades under pressure.
What happened with Tesla has had a lasting impact on how short-selling risk is perceived. The episode challenged traditional valuation models and highlighted the influence of investor sentiment, retail participation, and narrative-driven investing. It also underscored the importance of timing and risk management when shorting high-volatility, high-conviction stocks.
Tesla remains a divisive name. Some investors view it as a platform company with potential well beyond the automotive sector, including energy storage, AI, and autonomous systems. Others continue to question the sustainability of its margins, its governance practices, and the increasing competition in the electric vehicle space. Yet regardless of one’s outlook, Tesla’s role in reshaping how the market approaches short interest and price discovery is difficult to ignore.
Tesla (TSLA) Exchange Short Forecast as a % of Freefloat
The Tesla short was never just about balance sheets or earnings reports. It became a broader test of conviction in a company, a CEO, and a story that did not fit the traditional mould. In hindsight, it offered clear lessons about how markets behave when belief, scale, and momentum collide and what can happen when too many investors are positioned the same way.
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