Hedge funds shorting Elon Musk’s Tesla just lost more than $6.9 billion
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Tesla CEO Elon Musk has emerged as President-elect Donald Trump’s biggest billionaire fan.
PHOTO: REUTERS
Singapore – Since Donald Trump’s election win, hedge funds clinging on to bets against Tesla have lost billions of dollars as they feel the fallout of the special relationship between the President-elect and billionaire Elon Musk.
Hedge funds that had short positions against Tesla between election day and Nov 8’s close took an on-paper hit of at least US$5.2 billion (S$6.9 billion), according to Bloomberg calculations based on data compiled by S3 Partners.
The Tesla chief executive officer has emerged as Trump’s biggest billionaire fan.
Mr Per Lekander, CEO of hedge fund manager Clean Energy Transition, said he had “a small short in Tesla heading into the election”. He had managed to whittle the position down “quite a lot”, meaning his losses ended up being “pretty small”.
“But we have lost some money,” he said.
Tesla shares have shot up nearly 30 per cent since the Nov 5 election, adding more than US$200 billion to its market value. Against that backdrop, hedge funds that had previously built short bets against the company have since rushed to reverse course.
As at Nov 6, only 7 per cent of hedge funds were net short Tesla, down from 17 per cent in early July, according to weekly data provided by Hazeltree. That said, only 8 per cent are net long the stock.
Tesla has proved a dangerous stock to short, even as the rest of the electric vehicle (EV) industry struggles with headwinds spanning trade tensions, flagging consumer demand and increasing competition. In July, almost one-fifth of hedge funds tracked by Hazeltree had built bets against Tesla, only to be badly wrong-footed after the company unveiled sales figures that triggered a steep rally.
The wider EV sector, meanwhile, has lost more than 12 per cent in 2024, based on the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF. This follows a roughly 9 per cent decline in 2023. By contrast, Tesla is up roughly 30 per cent in 2024, after more than doubling its value in 2023.
Tesla’s performance also stands out in contrast to other stocks in the green sector. As markets digested the news of Trump’s victory, renewables stocks spanning wind to solar started to tank amid fears that Trump will live up to his promise to slash clean-energy incentives.
Mr Lekander says that in a little over a year from now, he expects that even Tesla will feel the sting of Trump’s anti-climate policies.
Notwithstanding the connection between the President-elect and Mr Musk, “Trump’s win is very negative for Tesla as an auto company”, Mr Lekander said. In about 12 to 18 months, the Trump administration will “eliminate a lot of the subsidies which Tesla really has been winning on”.
Mr Musk has lobbied for a role in Trump’s administration that will allow him to cut what he characterises as government bureaucracy and waste. Trump quickly latched onto the idea, publicly playing with the notion of a job as “Secretary of Cost Cutting” for the Tesla CEO.
Mr Musk’s position of influence now “is sort of a bridge between, arguably, the tech community and Washington”, said Mr Edward Lees, portfolio manager at BNP Paribas Asset Management.
Mr Musk has seen his own fortune soar in connection with the election outcome. In the days following the election, Tesla’s stock price surge added US$50 billion to his net worth, according to the Bloomberg Billionaires Index. This is after Mr Musk, who oversees an empire of six companies including social media platform X and SpaceX, spent more than US$130 million on Trump and other Republicans in competitive House races.
Mr Lekander says he reckons that the Trump effect accounts for roughly a third of Tesla’s current share price of more than US$300.
“So now, Tesla’s stock is more of a punting exercise on how much can Trump help Elon,” he said. BLOOMBERG
