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Tesla Motors Inc (TSLA): Interesting Short Behavior Around This Automaker

But in the case of Netflix, the provider has sustained its post-squeeze price quite well even moving higher than the initial squeeze price to pass $250 per share. Like Tesla, Netflix, Inc. (NASDAQ:NFLX)’s squeezes were driven by actual news and continued interest from Wall Street has helped drive the price from there. Both Tesla and Netflix share a characteristic of being high growth stocks with share prices than reflect this when compared to current fundamentals. Even though valuation based investors may despise stocks like Tesla and Netflix, the market is always looking for the next big disrupting company and positive news from either of these two companies helps to build on a bull thesis for continual future growth.

Not all squeezes last forever

One of the core parts of having a share price maintain its elevated levels after a squeeze is the reason that drove the squeeze. In the case of Tesla and Netflix, they were better than expected numbers from closely watched companies. But conditions of demand outstripping supply are not as sustainable in the long run judged by the Volkswagen short squeeze. Sports car maker Porsche decided to attempt a takeover of Volkswagen and announced it has nearly cornered the market on Volkswagen shares. This sent a panic through Volkswagen short sellers who had rapidly covered their positions in an extremely tight market. The percentage increase in Volkswagen’s share price was higher than that of Tesla or Netflix on the day of their announcements not because Volkswagen reported industry changing news but because there were so few shares to go around.

In the following days, Volkswagen was no longer the most valuable company in the world as market assessed the fair value of the automaker around where it was before since no significant news had come out. Ironically, Volkswagen’s current share price is still well below its short squeeze peak despite taking over Porsche and positioning itself for strong growth in the automotive market in the meantime.

Sustained price

After the initial few days of gains, many traders were calling for Tesla Motors Inc (NASDAQ:TSLA) shares to return to the $50 or $60 range around where they were near before the squeeze. However, after the squeeze, new buyers of shares appear to have disagreed and the share price has well surpassed the $100 level. The short interest appears to be on the rebound and time will tell whether the short sellers are going to increase their short positions to the levels seen before the squeeze. Tesla and Netflix have some very important times ahead of them and we’ll have to see how short sellers react to the companies and the market.

The article Interesting Short Behavior Around This Automaker originally appeared on Fool.com and is written by Alexander MacLennan.

Alexander MacLennan owns shares of Tesla Motors. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool recommends Netflix and Tesla Motors . The Motley Fool owns shares of Netflix and Tesla Motors . Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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