Short selling of electric car makers surged over the past month as auto stocks plummeted.
As of October 13, the overall auto and truck manufacturing sector saw total short interest of $27.6 billion, with electric vehicle manufacturers accounting for 71%, or $19.5 billion, of that number, according to data from S3 Partners, a New York financial-data company.
The top three shorted stocks were those of electric vehicle producers. Tesla (TSLA) It took the lead with short interest of $13.3 billion, representing 2.35% of total overdraft interest.
Rivian Cars (countryside) Second place with short interest 1.69 billion dollars. The third most shortened auto inventory was Lucid Group (LCID) With interest of 1.62 billion dollars.
Loanable shares in case of short supply
Short selling is bets that the stock price will go down. In a short sale, the 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 discontinued, Ihor Dusanyowski, managing director of predictive analytics at S3 Partners, told TheStreet.
“We see their use of equity borrowing” — the percentage of loanable shares actually borrowed — “at 98.9%,” he said.
“Equity loans are a market of supply and demand. If demand for borrowing is still strong and supply is limited, equity borrowing rates go up. A high utilization rate like this means that there will be very minimal new short selling in Lucid. long is driving its stock price in the near term.”
Other auto and truck companies that short sellers focused on include Ford Motor Company (F) Larva (cat) and General Motors (GM) .
General interest overdrafts in the auto sector decreased by $6.4 billion to $27.6 billion. S3 Partners said that loss included a $7.9 billion drop in stock prices for shortened shares, partially offset by $1.5 billion of new short selling.
“We saw a reversal in short selling that turned into cover and now back into short selling,” Dusaniwsky said.
Rivian Automotive has seen the largest increase in shares shorted in the past 30 days following a recall of more than 12,000 vehicles due to steering issues.
Ford, Caterpillar and Stellants (STLA) — the parent company of brands including, among others, Chrysler, Jeep, Fiat and Peugeot — the following auto or truck stocks that saw the largest increase in stock were shortlisted.
He said that short selling in the auto sector increased as the stock market declined and volatility increased.
Rising car prices and car loan prices
Dusaniwsky said dealers have increased their short positions as auto prices remain high while interest rates on auto loans are rising as the Federal Reserve continues to raise rates.
“They adjust their exposure based on what they see in the market,” he said.
apple (AAPL) The stock is still the highest short sold overall, at $14.6 billion, while Tesla remains in second place at $13.8 billion as of October 13.
Shorting for the auto and truck segment outperformed the market, Dusaniwsky said, with short sellers increasing $20.56 billion in annual earnings to date, up 53.8%, with average short interest coming in at $38.22 billion.
For the year short, electric vehicle shares outperformed shorting internal combustion engine shares. He said short sellers of electric vehicles surged $17.62 billion, or nearly 60%, versus $2.94 billion in ICE stock earnings, up 34%.
New short selling totaled $8.19 billion during the first half.
Short sellers covered $3 billion in short sales in June and $4.43 billion in July. An overdraft is when short sellers buy back shares to return to lenders.
In September through October 13, short selling returned in the sector with $1.76 billion in new short bets, Dusaniwsky said.
“With auto/truck manufacturing sales up 7.7% over the past week, we should see an increase in short selling in this sector as short sellers continue to ‘increase’ their positions in the winning trades,” he said.