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Tesla short sellers trim exposure but stay the course

Tesla short sellers trim exposure but stay the course
FILE PHOTO: A man walks near a logo of Tesla outside its China headquarters at China Central Mall in Beijing, China July 11, 2018. REUTERS/Jason Lee/File Photo   -   Copyright  Jason Lee(Reuters)
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By Noel Randewich

SANFRANCISCO (Reuters) – Short sellers betting against Tesla <TSLA.O> trimmed their exposure to the electric car maker’s stock on Monday after Chief Executive Elon Musk gave new information about his proposal to take the company private.

Midsession data showed traders continuing to reduce their bets against Tesla after short interest on Friday dipped to 26.9 percent of the company’s float, the lowest since June, according to S3 Partners, a financial analytics firm.

“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 in New York.

Short interest in Tesla was equivalent to 27.2 percent of its float a week ago, before Musk shocked investors by saying on Twitter he was considering taking Tesla private at $420 a share and that funding was “secured,” sending its stock sharply higher.

At $12.2 billion in short bets, Tesla remains the most shorted company in the United States, while globally, it is second only to Alibaba <BABA.N>, at $24.3 billion, according to S3 Partners.

With Tesla up 1.2 percent at $359.68 on Monday, Tesla short sellers have lost over $950 million since Musk’s tweet last week, according to S3 data.

In a blog post, Musk said on Monday he was in talks with potential backers of a possible buyout of Tesla, including Saudi Arabia’s sovereign wealth fund, but had not completed securing the funding.

Investors have voiced doubts about Musk’s ability to pull off what could be the largest-ever go-private transaction, valued at as much as $72 billion.

Tesla attracts extreme opinions on Wall Street. Mutual fund companies including Fidelity are confident of Musk’s vision, while most analysts are sceptical about the stock’s valuation and Tesla’s ability to compete with larger rivals. On Twitter, Musk has repeatedly taunted short sellers.

His tweet on Tuesday about taking Tesla private is under investigation by the U.S. Securities and Exchange Commission, according to the Wall Street Journal, and is the subject of investor lawsuits.

“There is no Saudi plan. There is no deal. Musk’s tweet was a fraud and he is a joke,” said Michael Lewitt, chief executive officer and chief investment officer at hedge fund firm Third Friday Management, who has options bets against Tesla.

Tesla’s stock was up 5 percent over the past week and is about 14 percent below Musk’s go-private price of $420.

(Reporting by Noel Randewich in San Francisco, additional reporting by Kate Duguid in New York; Editing by Cynthia Osterman)

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