U.S. Markets

Short sellers ramp up bets against Tesla, SolarCity shares: S3 Partners

Signage is displayed outside of Tesla Motors before the Tesla Energy Powerwall Home Battery event in Hawthorne, California April 30, 2015. REUTERS/Patrick T. Fallon

NEW YORK (Reuters) - Bets against both Tesla Motors Inc and SolarCity Corp shares have risen after Elon Musk announced a proposed merger last week, but any further bets will be small as both stocks have few borrowable shares, said Ihor Dusaniwsky, head of research at financial analytics firm S3 Partners on Tuesday.

Short interest in Tesla has hit $7.3 billion, up 16 percent in June and now close to its high of $7.4 billion in March, Dusaniwsky said.

Investors who short Tesla and SolarCity, betting that shares will fall, raised financial concerns about uniting two money-losing companies which both regularly raise cash to support their expansion.

Dusaniwsky said borrowing rates on existing shorts are starting to increase sharply with most shorts now being charged a 4 percent to 9 percent fee.

“There is not much stock left to borrow and what is left is going out the door at premium levels with borrow rates of 45 percent to 75 percent fee today,” he said. “There is virtually no stock left to borrow in SCTY which is reflected in the 100-percent-plus borrow cost of any scraps that have been traded today.”

Overall, Dusaniwsky said SolarCity short sellers “may not be digging into their wallets as deep as Tesla short sellers, but are still paying (collectively) over $1 million a day to keep their shorts on their books.”

Reporting By Jennifer Ablan; Editing by Cynthia Osterman