Close menu

January 23rd, 2020 | 14:26 CET

TESLA - does a short squeeze like once at Volkswagen threaten?

  • Short squeeze
Photo credits:

In the language of traders, the covering of short position in a rapidly rising market with a scarce supply is called short squeeze. So-called short sellers have previously borrowed shares from banks or other investors and then sold them because they wanted to bet on falling prices. If the share subsequently falls, the deal works out successfully. However, if the share rises, losses can occur when the position is closed out again so that the borrowed shares can be returned.

time to read: 1 minutes | Author: Mario Hose
ISIN: US88160R1014 , DE0007664039

Table of contents:

    Highest market capitalization in the world

    Some market participants will not forget October 28, 2008. On that day, the Volkswagen share was briefly quoted at EUR 1,005.00. Beyond any valuation logic, the share price rose because short sellers bet on falling share prices on a large scale.

    The whole situation escalated within a short time. Few days before this rise the shares still changed hands at less than 250.00 EUR. Volkswagen was at the top and at that moment the company with the highest market value in the world.

    High financial losses after short squeeze

    Following a report from Porsche that the sports car manufacturer had increased its share in Volkswagen to 42.6% and had also secured an option of a further 31.5%, the Stuttgart company had access to a total of 74.1%. The State of Lower Saxony also held a 20% stake in Volkswagen. This means that the free float was less than 6%.

    At the same time, short sellers and hedge funds stood in each other's way with approximately 12 to 15% of the available shares, which they had previously borrowed from banks, thus driving up the share price. One hedge fund lost almost EUR 15 bn in this context and entrepreneur Adolf Merckle lost around EUR 1 bn. Merckle committed suicide for around six weeks - a tragic end to a previously successful life.

    Sufficient trading volume for cover

    At the end of 2008, Volkswagen shares were trading below EUR 250.00 again after their brief rally and in the middle of the financial crisis. At TESLA, the situation is currently different. On yesterday's trading day, more than 6.2 million TESLA shares were short and short sellers were betting on falling prices. In total there are over 180.2 million shares of the battery car manufacturer. The company's market value at the closing price of USD 569.56 was around USD 102.7 billion. At the high, the shares changed hands at USD 594.50.

    TESLA had overtaken Volkswagen yesterday by the market value. The camp of TESLA fans celebrates this increase in value of over 100% since October 2019, but you should not forget one thing - without taxpayers' money and subsidies, TESLA would look very different.

    Rumour mill is not sustainable

    Given that over 31 million shares of the company were traded yesterday, there appears to be sufficient liquidity to cover short sales. But who knows, maybe the founder Elon Musk will fuel the share price with takeover speculation in the near future?

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and etc. on These contents serve information for readers and does not constitute a call to action or recommendations, neither explicitly nor implicitly. implicitly, they are to be understood as an assurance of possible price be understood. The contents do not replace individual professional investment advice and do not constitute an offer to sell the share(s) offer to sell the share(s) or other financial instrument(s) in question, nor is it an nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but rather financial analysis, but rather journalistic or advertising texts. Readers or users who make investment decisions or carry out transactions on the basis decisions or transactions on the basis of the information provided here act completely at their own risk. There is no contractual relationship between between Apaton Finance GmbH and its readers or the users of its offers. users of its offers, as our information only refers to the company and not to the company, but not to the investment decision of the reader or user. or user.

    The acquisition of financial instruments entails high risks that can lead to the total loss of the capital invested. The information published by Apaton Finance GmbH and its authors are based on careful research on careful research, nevertheless no liability for financial losses financial losses or a content guarantee for topicality, correctness, adequacy and completeness of the contents offered here. contents offered here. Please also note our Terms of use.

    Der Autor

    Mario Hose

    Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.

    About the author