The recent rocket ride of Tesla stock has put the hurt on holders of "shorts" -- those gambling that the price of the stock will fall. As a green-tech startup, Tesla has long been a darling of bearish investors, with nearly half of its shares held in short positions.
Investors who short a stock borrow shares from a broker and then sell them. They must eventually return the borrowed stock by buying it back on the open market. If the stock price falls, they buy it for less than they sold it, thus making a profit.
But Tesla stock has doubled in price in the past month. On April 16, shares of the EV manufacturer went for about $45. At the end of last week, after Tesla announced its first profitable quarter, the stock was bouncing around $90.
Investors who felt Tesla was overvalued at $45 have found themselves frantically having to buy expensive shares to cover their short positions, driving the stock price even higher.
"It didn't come as a huge surprise that short positions are silently being run out of town by a recent stock surge," according to the financial Web Site Value Walk late last week. "'Where the hell did that come from?' must be the refrain from those that have been caught on the wrong side of a 35 percent stock price rise in the last five days for Tesla."