Carson Block’s Muddy Waters wager against a hedge fund favorite, Chinook Therapeutics Inc., took a hit Monday after Novartis AG agreed to buy the drug developer in a deal for up to $3.5 billion.

With the stock surging 58%, its best day since 2015, short sellers betting against Chinook are looking at paper losses of $58 million, according to data from S3 Partners. Monday’s rally erased bearish investors’ gains for the year and put them on track for a mark-to-market loss of roughly $56 million for 2023.

Carson Block’s Latest Short Bet Is Burned by Novartis M&A Deal [Bloomberg]

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Tesla doubters have experienced a jolt of economic reality.

According to S3 Partners, short-sellers of Tesla’s gravity-allergic stock have lost $35 billion in 2020.

Falling Short
Tesla shares have been in ludicrous mode all year and are now up over 600%. In November, Tesla climbed 46% and short-sellers lost $8.5 billion in a single month.

Bruised and battered, many short-sellers have simply given up. The percentage of shares sold short has fallen around 63% so far this year. Still, about 6% of Tesla’s shares are held by short-sellers, well above the 1-2% average for large companies.

A few numbers to put the losses in perspective:

• Short-seller losses for high-fliers Amazon and Apple have been roughly $5 billion each this year.
• The U.S. airline industry posted combined losses of $24.2 through the first nine months of 2020, the worst in its history.
• Through the first 11 years of Tesla’s corporate history, it lost $6.7 billion.

Elon’s Warning: In an email to employees obtained by Electrek, he warned that if investors grow concerned with Tesla’s 1% profit margin, the stock will “immediately get crushed like a soufflé under a sledgehammer.”