Interactive Brokers increases margin requirement for Tesla

FILE PHOTO: A row of new Tesla Model 3 electric vehicles is seen at a parking lot in Richmond, California, U.S. June 22, 2018. REUTERS/Stephen Lam/File Photo

(Reuters) - Interactive Brokers Group said on Friday it will increase margin requirements for clients making Tesla Inc bets due to recent volatility in shares of Elon Musk’s electric car company.

The electronic brokerage said it told clients in a memo on Thursday that it will raise its margin requirements to 30 percent for regular accounts, which typically have a 25 percent margin requirement, and to 20 percent for margin accounts, which typically have a 15 percent requirement.

Due to the change, which takes effect after the market close on Tuesday, July 31, clients making long or short Tesla bets through shares, options, futures or other means will need more cash in their accounts as collateral for any losses.

Roughly 35.4 million Tesla shares, or 27.95 percent of its float, are currently sold short and the cost of borrowing Tesla shares has risen to 2.6 percent this year from less than 1 percent last year, according to financial analytics firm S3 Partners.

Tesla short sellers are down $469 million for the year to date even after gains of $1.23 billion for July on a mark to market basis, according to S3.

Tesla shares last traded down 2.8 percent on the day at $298.19 after Steve Eisman, Neuberger Berman Group money manager, told Bloomberg TV he is betting against Tesla due to negative cash flow. Eisman’s bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short.”

Tesla shares were on track for a 13 percent drop for July and have fallen 4.3 percent so far this year.

The stock often swings wildly in either direction. While some investors have been betting heavily that there will be strong demand for Tesla cars, others have been skeptical due to concerns including cash needs, production problems and controversies surrounding Musk, Tesla’s founder and chief executive.

Tesla has reached a high of $373.73 so far in 2018 and a low of $244.59.

Reporting by Sinéad Carew and Saqib Iqbal Ahmed; Editing by Dan Grebler