Hedge Funds Shorting Tesla Just Lost More Than $5 Billion

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(Bloomberg) — Since Donald Trump won the election, hedge funds clinging to bets against Tesla have lost billions of dollars, feeling the fallout from the special relationship between the president-elect and Elon Musk.

Hedge funds that had short positions against Tesla between Election Day and Friday’s close received a paper loss of at least $5.2 billion, according to Bloomberg calculations based on data compiled by S3 Partners.

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They were among a shrinking group caught out, with many of their peers canceling bets against Tesla over the past four months, according to separate data provided by Hazeltree tracking the positions of more than 500 hedge funds. This change in positions coincided with Musk’s support for Trump on July 13.

The Tesla CEO emerged as billionaire Trump’s biggest fan. Musk has used his position as the world’s richest person to boost Trump’s campaign, making him one of the biggest donors to the 2024 election. Placing Musk on the side of the president-elect now positions him for a position of political influence, as Trump makes clear he plans to reward his loyalists.

Per Lekander, CEO of hedge fund management firm Clean Energy Transition, says he has “a little short on Tesla before the election.” He managed to reduce the position “quite a lot,” meaning his losses were “quite small.”

“But we lost some money,” he added.

Since the November 5 election, Tesla shares have risen nearly 30%, representing more than $200 billion in additional market value. Against this backdrop, hedge funds that had previously short bet against the company have since scrambled to reverse course.

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As of Nov. 6, only 7% of hedge funds were short Tesla, down from 17% in early July, according to weekly data provided by Hazeltree. However, only 8% are net long stocks.

Tesla has proven to be a dangerous stock to short, even as the rest of the electric vehicle industry suffers from headwinds extending from trade tensions, weak consumer demand and increased competition. In July, nearly a fifth of the hedge funds tracked by Hazeltree had bet against Tesla, but they were very wrong after the company revealed sales numbers that led to a sharp rise.

Meanwhile, the broader electric vehicle sector has lost more than 12% this year, based on the performance of the KraneShares Electric Vehicle ETF and Future Mobility Index. This follows a roughly 9% decline in 2023. Tesla, by contrast, is up nearly 30% in 2024, after doubling in value last year.

Tesla’s performance also stands out in contrast to other stocks in the green sector. As markets digested news of Trump’s victory, renewable energy stocks spanning from wind to solar began to decline, amid concerns that Trump will make good on his promise to reduce clean energy incentives.

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Lekander says he expects that in a little more than a year from now, even Tesla will feel the brunt of Trump’s anti-climate policies.

Despite the relationship between the president-elect and Musk, “a Trump win is very negative for Tesla as a car company,” Lekander said. And in about 12 to 18 months, the Trump administration will “roll back a lot of the subsidies that Tesla was really winning.”

Musk has pushed for a role in the Trump administration that would allow him to reduce what he describes as government bureaucracy and waste. Trump quickly latched on to the idea, publicly toying with the idea of ​​a “cost-cutting secretary” job for the Tesla CEO.

Musk’s position of influence now is a kind of bridge between the technology community and Washington, said Edward Lees, portfolio manager at BNP Paribas Asset Management.

Lees says he has “held Tesla at various points,” without going into detail about current positions.

Musk, who declared his public support for Trump after the then-presidential candidate survived an assassination attempt in July, saw his fortune rise in relation to the election outcome. In the days following the election, Tesla’s rising stock prices added $50 billion to his net worth, according to the Bloomberg Billionaires Index. It comes after Musk, who oversees an empire of six companies including X and Space

Lekander says he believes Trump’s influence accounts for roughly a third of Tesla’s current stock price of more than $300. “So Tesla stock is now just an exercise in how much Trump can help Elon,” he said.

-With assistance from Craig Trudell, Abhishek Vishnoi, Lisa Pham, and Rob Dawson.

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