Hedge funds that bet on Elon Musk's Tesla lost billions of dollars after Donald Trump won the White House last week, according to a report.
Investment firms that held short positions in the electric car maker's stock between Election Day and Friday's close took a theoretical hit of at least $5.2 billion. According to Bloomberg calculations Based on data collected by S3 partners.
A number of funds have been unwinding their bets on Tesla over the past four months, despite challenges for the electric car maker such as tariffs, weak consumer demand and increased competition in the industry, Bloomberg reported.
Data from Hazeltree, which tracks more than 500 hedge funds, obtained by Bloomberg shows that the majority of hedge funds that were shorting Tesla stock were the first to sell Tesla shares since 2017, when Musk was killed on July 13, shortly after the first assassination attempt on the former president. After supporting Trump, he reportedly began backtracking on his positions.
Since Election Day, Musk's Tesla stock has risen about 40%, adding more than $200 billion in market value.
On Friday, Tesla's valuation exceeded $1 trillion, and hedge funds are rushing to cancel short sales in the company.
Only 7% of hedge funds were shorting Tesla stock the day after the election, according to Hazeltree data obtained by Bloomberg. This is a far cry from the 17% in early July. Only 8% of hedge funds are net buyers of Tesla.
Tesla stock has soared 39.2% so far this year, while the broader EV sector has rallied 12% this year after falling 9% in 2023, according to the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF reported by Bloomberg. It has fallen by more than %.
Tesla stock also outperformed other clean energy stocks, hurting Trump's victory.
Musk, the world's richest man with a net worth of $304 billion, according to Forbes, has emerged as perhaps Trump's most prominent ally throughout the president-elect's campaign.
He has donated more than $100 million to pro-Trump PACs, rallied on Trump's behalf, and encouraged Americans to vote early with a $1 million a day giveaway.
Tesla's post-election success is due to the close relationship between Trump and Musk, who met at the president-elect's Mar-a-Lago residence despite expectations that Trump would launch an anti-EV agenda. They were also photographed waiting together for the election results.
“Trump's victory is very negative for Tesla as a car company,” said Per Lekander, CEO of hedge fund manager Clean Energy Transition. In about 12 to 18 months, the Trump administration will “rescind many of the subsidies that Tesla has actually earned.”
The president-elect has pledged to take up Mr. Musk's proposal to create a government efficiency commission and give billionaires control of the government.
Last month, Musk said he would use his government position to eliminate regulatory obstacles to approval of fully self-driving electric vehicles, one of the main challenges facing the company.
Mr. Musk has already scored a major victory in Mr. Trump's upcoming return to the White House. On Friday, his net worth exceeded $300 billion as Tesla stock soared.
The Post reported that Tesla short sellers have been defrauded in the past, losing nearly $1.5 billion in 2019 after the company reported unexpected profits.
