Tesla Stock Up 5.5% On News Elon Musk Deleted Twitter, Potential 'Short-Squeeze'

Shares of Tesla Inc. ended Monday at $225.03, up 4.7 percent, and traded even higher at $225.50 during after hours. It rose to a high of 5.5 percent as of 2:50 p.m. EDT.

This continuing recovery in Tesla’s battered stock adds immensely to the problem of short sellers who now have to contend with the awful possibility of being caught in a dreaded short-squeeze.

Tesla’s heavily shorted stock remains down at least 30 percent since the start of the year and its unrelenting fall has led to more than 40 million Tesla shares being sold short. The stock’s recovery on Monday continued a resurrection that’s seeing it rise from two-year lows.

Another factor that might have lifted Tesla’s shares Monday was Musk’s announcement he’s leaving Twitter.

"Just deleted my Twitter account," tweeted Musk.

One analyst said Musk’s update might have helped boost Tesla stock. Musk’s Twitter account, however, remains active as of Monday but he hasn’t posted anything on it since saying he’s departed Twitter.

Musk’s unrestrained use of Twitter has led to his repeated run-ins with the U.S. Securities and Exchange Commission (SEC). SEC stripped Musk of his title as Tesla chairman as punishment for a series of tweets related to Saudi Arabia and Tesla’s going private in August 2018.

As for the stock, analysts said short sellers betting against Tesla might be headed towards a devastating short-squeeze. A short-squeeze occurs when a heavily shorted stock such as Tesla suddenly begins to increase in price.

When a large number of traders with short positions cover their trades by purchasing shares, it sometimes causes a stock to rise in the near term, creating a short-squeeze. Short-squeezes are usually ignited by a positive development that suggests the shorted stock may be headed for a turnaround.

In Tesla’s case, assertions by analysts the company faces serious production and demand problems seem to have been seriously overblown. Tesla insiders have revealed the company is delivering 1,000 electric vehicles (EVs) per day.

Tesla is also poised to beat its production record set in Q4 2018 when it delivered over 90,000 vehicles to customers. Musk has said if Tesla can hit the 1,000 per-day production goal, it might be looking at a record quarter.

Ben Kallo, director of financial services company, Robert W. Baird & Co. and a notable Tesla bull, believes the Tesla’s sharp rise on Monday might be related to the “start of short covering over the next few weeks.”

Kallo also provided several aspects currently in place that might trigger Tesla shorts to cover their position. Among these will be “several upcoming catalysts,” including the 40 million Tesla shares currently sold short, and the fact the “demand issue will be proven false.”