Since the squeeze, Volkswagen shares have fallen back in line with more typical valuations for automakers. Unlike the Netflix, Inc. (NASDAQ:NFLX) squeezes, the Volkswagen squeeze was driven by a tightening of the share supply, not by any major company news. After the market adjusted for Volkswagen’s true value (and after Volkswagen turned the tables and took over Porsche), Volkswagen shares traded largely in line with those of other major automakers. Due to the unlikeliness of another automaker trying to take over the now larger Volkswagen Group, another Volkswagen short squeeze does not seem to be in the cards at this time.
However, Tesla Motors Inc (NASDAQ:TSLA)’s size makes a buyout offer for the automaker more likely than one for Volkswagen. But unlike the Volkswagen situation where PORSCHE AUTO ADR (PINK:POAHY) was able to secretly acquire the vast majority of the company, a buyer of Tesla would have to make its growing holdings public. Under this situation, the short squeeze would probably not be as large as the Volkswagen one but could still result from shorts rushing to cover below the takeover price.
A short squeeze in Tesla, if it does happen all at once, would most likely be driven by some piece of positive news that excites the markets as the profitability announcement did. At this point, Tesla shorts are deeper in the red and may begin to cover earlier hoping to do so before the stock gains another 20%.
Tsunami of hurt
Back in September 2012, Tesla’s CEO Elon Musk warned those short Tesla Motors Inc (NASDAQ:TSLA) shares that a “tsunami of hurt” would be coming their way. While this sounds like big corporate talk, the share price increase since September has left shorts since then deep in the red.
In September, Model S production was still tooling up. Today, Model S production is running at full capacity with profits now expected for Q1 2013. Shares topped $50 each on April 22 slicing through the $50 level far easier than it took to move past $40 level. If Tesla Motors Inc (NASDAQ:TSLA) continues to execute, a short position in Tesla will continue to get more painful.
If progress just continues to happen over time, shorts could slowly cover adding a long period of buying pressure to the stock. However, if a strongly positive piece of news or buyout offer were to be released for Tesla Motors Inc (NASDAQ:TSLA), shorters of this electric automaker could find themselves in the same position as Netflix, Inc. (NASDAQ:NFLX) and Volkswagen shorts.
The article The Next Netflix-esque Short Squeeze? originally appeared on Fool.com.
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