Tesla Inc. (TSLA) has regained the top spot for the most-shorted stock in the U.S. in the wake of SEC action against CEO Elon Musk.
Tesla shares fell 13.1% as of 2:00 p.m. in New York. The SEC filed fraud charges against Musk Thursday in connection with his tweets in August that he had secured funding to take the electric vehicle maker private at $420 a share.
Ihor Dusaniwsky Managing Director at S3 Partners Financial Technology and Analytics Firm S3 Partners, a financial technology company that monitors short selling action, said Tesla has retaken the lead from Amazon.com Inc. (AMZN) and Apple Inc. (AAPL) as the most-shorted stock in the country.
"Tesla regained the top spot on the U.S. most shorted equity leaderboard as short selling in the stock has grown slowly but steadily over the last two weeks and Apple's (AAPL) short interest took a dramatic hit when the iPhone XS/XS Max went on sale last week," Dusaniwsky said in his report. "Tesla short interest is $10.19 billion, 33.13 million shares shorted, 25.98% of its float."
The report adds that short sellers are up $1.27 billion in mark-to-market gains as of Friday morning, which has completely offset the difficult year thus far for these speculators, leaving them up $643 million for the year.
Dusaniwsky told TheStreet this afternoon that short sellers are brimming with confidence at the moment.
"There's $10.2 billion saying this is going to continue," he said. "That's a lot of conviction and people betting Tesla is going to drop some more."
On that confidence, S3 Partners is forecasting short selling to continue if the stock continues its slide.
"We expect shares shorted to increase in the near term," the report concludes. "If Tesla's stock price continues to drop we could see shares shorted climb towards the 39-41 million share levels we saw in May.
Some short sellers were extremely aggressive in their bets, according to Bloomberg data.
High trading volume came in with strike prices as low as $50 per share, slated to come as quickly as October 19. Dusaniwsky called the trading action "ominous."
That would mean an over 80% drop in the stock in less than one month.
Real money contributor Stephen "Sarge" Guilfoyle downplayed the interesting action betting on a swift swoon for Tesla.
"It's low risk, somebody is weighing the oddball chance that the stock goes to zero against spending a few bucks in case it actually happened," he explained. "Some traders take crazy shots like this on newsy days, hoping just one hits."
In any event, short-sellers seem happy to place bets again as Musk's Twitter habits tie him up in court.
-- Jacob Sonenshine contributed to this article.