Tesla on Target for Its Worst Year as Company Woes Mount

December 27, 2022

Exchange-traded funds betting on gains in Tesla Inc. tumbled for their 12th day, as investors flee mounting problems at the world’s biggest electric car maker along with its mercurial chief executive officer Elon Musk. 

The company extended a production halt in its Shanghai, China plant, on Saturday, the Wall Street Journal reported, as Covid-19 infections among workers disrupted production.  

The Direxion Daily TSLA Bull 1.5X Shares (TSLL), which invests in Tesla shares as well as options and other financial instruments to beat the performance of Tesla stock, was down 13% at midday. The single-stock ETF has lost 78% since it began trading in August. 

On the flip side, the AXS TSLA Bear Daily ETF (TSLQ), which aims to profit off declines in Tesla, rose 8.1% Tuesday and has more than doubled over the same period that TSLL has tanked. Tesla shares, which have plummeted from their split-adjusted high of about $410 late last year, fell 8% to around $113 Tuesday and are poised for their worst year ever. 

Fears of a slowdown in Tesla's China sales come after the company said in October it would miss its goal of boosting deliveries this year by 50% over 2021. 

Electric vehicle demand worries were further fanned Tuesday after Chinese EV maker Nio Inc. said it would deliver fewer cars than expected in the fourth quarter cut its fourth-quarter due to Covid outbreaks and supply chain problems. 

While long Tesla ETFs have plummeted, investors appear to be not only sticking with them, but increasing their bets. TSLL’s inflows from Dec. 1 to Dec. 26 nearly doubled to $76.6 million, from $44.1 million that flowed in between Nov. 1 and Nov. 23, according to ETF.com data. Over the nearly two-month period, the short TSLQ had inflows of $14.8 million. 

Direxion’s short Tesla fund, the Direxion Daily TSLA Bear 1X Shares (TSLS), has performed akin to TSLQ, more than doubling over the past three months.  

Another short Tesla fund, the GraniteShares 1x Short TSLA Daily ETF (TSLI), has also surged while the GraniteShares 1.25x Long TSLA Daily ETF (TSL), a long single-stock fund that also seeks to beat the performance of Tesla, has plummeted. 

 

Contact Ron Day at [email protected]  

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