Ever since Donald Trump won the election, hedge funds have been hedging against bets Tesla Inc. has lost billions of dollars as they feel the effects of the special relationship between the president-elect and Elon Musk.
Hedge funds that held short positions against Tesla between Election Day and Friday’s close had at least $5.2 billion on paper, according to estimates based on data compiled by Bloomberg. S3 Partners.
They were among a shrinking group, with many of their members withdrawing their bets against Tesla over the past four months, according to the data provided. Scarce Track positions of over 500 hedge funds. This adjustment of positions coincided with Musk’s endorsement of Trump on July 13.
Tesla’s CEO has become Trump’s biggest millionaire fan. Musk has used his position as the world’s richest person to turbocharge Trump’s campaign, and biggest donors of the 2024 election. Giving the president-elect his due now requires Musk to be in a position of political influence, as Trump makes it clear that he intends to reward loyalists.
Per Lekander, CEO of hedge fund manager Clean Energy Transition, says he was “a little short on Tesla” heading into the election. He managed to reduce the position “a lot”, which means that his losses were “relatively small”.
“But we lost some money,” he said.
Since the Nov. 5 election, Tesla’s stock has gained close to 30%, representing more than $200 billion in added market value. Against this backdrop, hedge funds that had previously built short bets against the company have moved forward to reverse course.
As of Nov. 6, only 7% of hedge funds were net short Tesla, down from 17% in early July, according to weekly data from Hazeltree. That said, only 8% are long stocks.
Tesla has proven to be a risky stock, even as the rest of the electric vehicle industry struggles with headwinds that include trade tensions, heightened consumer demand and increasing competition. In July, nearly a fifth of the hedge funds tracked by Hazeltree made bets against Tesla that went wrong. wrong after the presentation of the company sales figures which resulted in a strong rally.
The broader EV sector, meanwhile, has lost more than 12% this year, based on the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF. This represents a decrease of approximately 9% in 2023. In contrast, Tesla is up about 30% in 2024 after doubling its value last year.
Tesla’s performance also stands out compared to other stocks in the green sector. As markets digested the news of Trump’s victory, renewable energy stocks from wind to solar began to tank amid fears that Trump will follow through on his promise to cut clean energy incentives.
Lekander says he expects Tesla to feel the sting of Trump’s anti-climate policies in just over a year from now.
Despite the connection between the president-elect and Musk, “Trump’s victory is very negative for Tesla as a car company,” Lekander said. In 12 to 18 months, the Trump administration will “remove many of the subsidies that Tesla has actually earned.”
Musk has lobbied for a role in the Trump administration to cut what he characterizes as government bureaucracy and waste. Trump quickly jumped on the idea, publicly toying with the idea of the Tesla CEO’s “Cost Reduction Secretary” job.
Musk’s “position of influence is arguably the bridge between the tech community and Washington,” said Edward Lees, the portfolio’s manager. BNP Paribas Asset Management.
Lees says he has “held Tesla at various points,” without elaborating on current positions.
Read more: Musk is about to find out if Trump gets him $130 million
Musk, who publicly endorsed Trump after the then-presidential candidate survived an assassination attempt in July, has seen his fortune increase in connection with the election’s outcome. In the days following the election, Tesla’s stock price surged He added $50 billion to his net worthAccording to the Bloomberg Billionaires Index. That includes Musk, who oversees an empire of six companies X and space X, spend more More than $130 million to Trump and non-voting Republicans in House races.
Read more: Billionaires are giving Trump more than Harris in the 2024 election
Lekander says he believes the Trump effect accounts for roughly a third of Tesla’s share price of more than $300. “So the Tesla action now is more of an exercise in how much Trump can help Elon,” he said.
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