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Nov. 30, 2020, 1:03 p.m. EST

Nikola’s short sellers up more than $400 million after downsized GM deal

Claudia Assis

Investors shorting Nikola Corp. stock were up $414 million in paper gains Monday after the startup announced a watered-down deal with General Motors Co. earlier in the day, and shares tanked more than 20%.

See also: Nikola stock drops as GM deal is now ‘nothing to write home about

The Nikola (NAS:NKLA) short sellers, who bank on a stock falling in price, are now profitable for the year with a net-of-financing mark-to-market profit around $309 million, S3 Analytics said in a note Monday.

They are almost in the black for the month of November as well, down about $37 million in month-to-date mark-to-market losses, said S3, a financial technology and analytics firm.

Nikola said earlier Monday that its deal with GM (NYS:GM) would include a supply partnership in fuel-cell technology but no GM stake in Nikola. GM also halted plans to build the Nikola Badger electric pickup truck, and the startup said it would return customer deposits on the vehicle.

Short interest in Nikola is around $1.30 billion, or some 57.30 million shares shorted, the equivalent of nearly 43% of its float, S3 said.

Nikola is the third largest short in the auto manufacturing and construction and machinery sectors, behind Tesla Inc. (NAS:TSLA) and Nio Inc. (NYS:NIO) , S3 said.

Short sellers bet on a stock falling in price. They then borrow the shares to sell them, hoping they can later pick them up at a lower price, return them to the original lender, and pocket the difference.

Shares of Nikola have gained about 110% this year, compared with gains around 11% for the S&P 500 index. (S&P:SPX)

Link to MarketWatch's Slice.