Short sellers trim their exposure on Tesla

What many thought to be a joke is turning out to be anything but. While analysts are concerned about Tesla’s ability to pull off what is slated to be the largest buyout in in history, many backers, including mutual fund Fidelity believe in Musk’s ability and vision of the future.

Following Tesla Inc’s CEO Elon Musk providing more information on his proposal to take the company private, investors betting against Tesla trimmed their exposure to its stock.

According to trade data from financial analytics firm S3 Partners, traders continued to trim their bets against Tesla after short interest on Friday dipped to 26.9% of the company’s float, its lowest since June 2018.

“I’m seeing a little bit of covering, but it’s not indicative of a change in conviction. It’s more just people cutting a little fat off their trades,” said Ihor Dusaniwsky, head of research at S3 Partners.

Before Musk’s tweet of taking Tesla private at $420 a share for which he had “secured” funding, short interest in Tesla was equivalent to 27.2% of its float a week ago.

According to S3 Partners, at $12.2 billion in short bets, Tesla remains the most shorted company in the U.S., while globally, it is second only to Alibaba, which faces short bets of $24.3 billion.

On Monday, through a blog post, Musk disclosed that he was in talks with potential backers, including Saudi Arabia’s sovereign wealth fund, for the Tesla buyout but had yet to get 100% funding for it.

On Wall Street, Tesla has typically attracted extreme opinions: while some financial companies, including Fidelity are backing Musk’s vision of the future of transportation, many analysts remain skeptical on Tesla’s stock valuation and the company’s ability to compete with larger rivals.

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