5 Biggest Short Squeezes of All Time

2. Tesla, Inc. (NASDAQ: TSLA)   

Tesla, Inc. (NASDAQ: TSLA) has been one of the most shorted stocks on the market over the past ten years. Since 2011, short-sellers have lost close to $40 billion in bets against the electric vehicle maker. Beginning late 2019, the company’s shares rallied a record 700% before taking a breather at the end of the first quarter of 2021 on the back of demand concerns in China and investigations against the autopilot features of Tesla cars in the United States. Wall Street thinks the firm is overvalued as it is nearly triple in market cap to the two largest automakers in the US.

According to news publication Forbes, short sellers were forced to buy back at least 38 million Tesla, Inc. (NASDAQ: TSLA) shares between late 2019 and July 2020, playing at least some part in the historic rally of the stock through the period. There is institutional interest as well. In the summer of 2020, institutional investors owned 74% of all Tesla stock available to the public. These investors offload Tesla stock during times of crisis, allowing short sellers to buy. Recently, Michael Burry of Scion Asset Management revealed a $530 million short call on Tesla. 

Burry, immortalised in Hollywood epic The Big Short for his investment exploits during the 2008 financial crisis, said earlier this year that the reliance on regulatory credits for profits would hurt Tesla. The volatile year that Tesla has had, with supply shortages hitting production and demand worries hitting vehicle deliveries, would lend credence to the argument. At the end of the first quarter of 2021, 69 hedge funds in the database of Insider Monkey held stakes worth $5.6 billion in Tesla, Inc. (NASDAQ: TSLA), up from 45 in the previous quarter worth $2.7 billion.