Tesla has rallied 'too far too fast'

Tesla has rallied “too far too fast” and the risk-reward is now “skewed to the downside,” according to one prominent short-seller. Shares fell following the comments.

“Much respect to Musk but we are buyers 100 pts lower,” tweeted Citron Research, the firm run by short-seller Andrew Left.

Tesla shares have been on fire, gaining 69 percent, since the electric-car maker reported a surprise third-quarter profit on Oct. 23. Ahead of the results, Tesla settled at $254.68 a share.

The spike in Tesla's share price has been particularly painful for short-sellers, or those betting shares would fall, saddling them with $3.26 billion in mark-to-market losses this year, according to data from financial-analytics firm S3 Partners.

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Investors betting against Tesla are still short 27.4 million shares, or $11.81 billion, S3's data showed, suggesting that Citron's claim that short interest is at an all-time low is incorrect. S3's data shows there would need to be an additional 3 million shares of short covering to get below the January 2019 low of 24.2 million.

"Tesla is certainly in the midst of a short squeeze," Ihor Dusaniwsky, managing director at S3, told FOX Business, adding that he expects "additional short covering if Tesla can hold these price levels or continue this rally."

Left has been whipped around by the fluctuations in Tesla shares.

On April 26, he announced he was giving up trading Tesla’s stock, telling Reuters he was disappointed in the way it was trading and no longer involved. Shares had fallen 20 percent since Oct. 24, when he predicted they would rise after previously betting against them.

Tesla had gained as much as 1 percent earlier on Thursday after a report said the company would begin on Monday delivering Model 3 sedans made at its China Gigafactory.

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Shares are up 29.5 percent this year, in line with the S&P 500's gain.