Tesla, Rivian and Lucid Are Favorites of the Short Sellers

Short-selling for electric-vehicle manufacturers rose during the past month as stock prices for car companies fell.

As of Oct. 13 the auto- and truck-manufacturing sector overall saw its short interest total $27.6 billion, with EV manufacturers making up 71%, or $19.5 billion, of that figure, according to data from S3 Partners, the New York financial-data company. 

The top three shorted stocks were those of EV producers. Tesla  (TSLA)  led the way with short interest of $13.3 billion, accounting for 2.35% of overall short interest.

Rivian Automotive  (RIVN)  ranked second with short interest of $1.69 billion. The third most-shorted auto stock was Lucid Group  (LCID)  with interest at $1.62 billion. 

Lendable Shares Are in Short Supply

Short sales are bets that a stock’s price will decline. In a short sale, a trader borrows shares and sells them, hoping to buy them back at a lower price, return them to the lender and pocket the difference.

Most of Lucid’s stock-borrowing availability has been taken down, Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, told TheStreet. 

“We see its stock-borrow utilization” — the percentage of lendable shares already borrowed — “at 98.9%,” he said. 

“Stock loans are a supply-and-demand market. If borrow demand is still strong and there is limited supply, stock-borrow rates rise. A high utilization rate like this means there will be very minimal new short-selling in Lucid. It will be long selling and buying driving its stock price in the near term.”

Other automotive and truck companies on which short-sellers have focused include Ford Motor  (F) , Caterpillar  (CAT)  and General Motors  (GM) .

Overall short interest in the auto sector declined by $6.4 billion to $27.6 billion. This loss included a $7.9 billion decline in the stock prices of the shorted shares, offset partly by $1.5 billion of new short selling, S3 Partners said. 

“We saw a reversal of short-selling that turned into covering and now back to short-selling,” Dusaniwsky said.

Rivian Automotive had the largest increase in shares shorted over the past 30 days on the heels of its recall of more than 12,000 vehicles due to steering issues.  

Ford, Caterpillar and Stellantis  (STLA)  — parent of brands including, among others, Chrysler, Jeep, Fiat and Peugeot — were the next auto or truck stocks with the largest increase in shares shorted.

Short-selling in the automotive sector has increased as the stock market drops with increased volatility, he said. 

Car Prices and Auto-Loan Rates Elevated

Traders have increased their short positions as car prices remain high while interest rates on auto loans are rising as the Federal Reserve continues to increase rates, Dusaniwsky said.

“They are adjusting their exposure based on what they see in the market,” he said.

Apple  (AAPL)  remains the top shorted stock overall, at $14.6 billion, while Tesla remains in second place at $13.8 billion as of Oct. 13.

Shorting the auto and truck sector has outperformed the market, with short-sellers up $20.56 billion in year-to-date mark-to-market profits, up 53.8%, as short interest has averaged $38.22 billion, Dusaniwsky said. 

For the year shorting EV stocks has outperformed shorting internal-combustion-engine stocks. EV short-sellers are up $17.62 billion, or nearly 60%, versus $2.94 billion in profits for ICE stocks, up 34%, he said.  

New short-selling totaled $8.19 billion during the first half. 

Short-sellers covered $3 billion of short sales in June and $4.43 billion in July. Short covering is when short-sellers buy back stock to return to lenders.

In September through Oct. 13, short selling in the sector returned with $1.76 billion of new short bets, Dusaniwsky said.

“With auto/truck manufacturing shorts up 7.7% over the last week, we should see increased short selling in the sector as short sellers continue to ‘top up’ their positions in winning trades,” he said.

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