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Short sellers cut exposure to Tesla after Musk funding bid

James Titcomb
The number of investors betting against Tesla has fallen 

Short sellers have cut their exposure to Tesla since Elon Musk’s aborted bid to go private, with bets against the company falling to their lowest level in four months.

Although the electric car maker remains one of the stock market’s most shorted companies, bets against the company have fallen in recent days, according to data from S3 Partners.

Some 32.5m shares – around a quarter of its traded stock – were out on loan to short sellers last week.

This is down 6pc since Mr Musk tweeted three and a half weeks ago that he had “funding secured” to take Tesla private, and down 22pc from May, when short selling against the firm peaked. 

Short sellers, who borrow shares in the hope that they will be able to profit from a fall in future by buying shares back more cheaply, have been a source of constant frustration to Mr Musk.

Shorters lost out when Tesla’s share price spiked after Mr Musk revealed his plans, but shares have since fallen, leading to profits of more than $1.3bn (£1bn).

A week ago, Mr Musk abandoned his ambition to take Tesla private, saying shareholders had convinced him to keep the company on the stock market. Ihor Dusaniwsky, of S3 Partners, suggested the recent decline in short selling was largely due to traders taking profits as they closed their positions.

Tesla’s future now rests on its ability to ramp up production of the Model 3, its more affordable electric car, and whether the loss-making company can break even in the coming months.  Many analysts believe it will have to raise cash soon, which could damage its share price.