Hedge funds whose short positions against Tesla Inc. backfired badly after the Nov. 5 election are watching the latest sell-off from the sidelines, for fear of being burned again.
After losing more than $5 billion in the days after Donald Trump was voted back into the White House, Tesla short-sellers now have a position equivalent to just 2.5 percent of the company’s publicly traded shares, according to data compiled by S3 Partners. That’s well below the historical average of about 23 percent, according to Bloomberg-compiled data.
Tim Smith, managing director of data insights at Hazeltree, said the reality is funds that maintained their shorts against Tesla for extended periods in the past have lost money, which helps explain why they’re now “cautious.’’
But so far this year, that caution has come at a cost. Tesla’s share price is now down more than 40 percent since the end of December, equivalent to about $550 billion of lost market value.
Kerry Goh, chief executive at Kamet Capital Partners Pte, said his hedge fund hasn’t shorted Tesla since 2019. He views the current sell-off as “temporary’’ and warns that there’s “no predictable pattern’’ to shorting Tesla.
“Nobody knows how to play this trade,’’ said Goh, who oversees more than $1 billion from his base in Singapore.
Per Lekander, CEO of Clean Energy Transition LLP, said his firm has a moderate short position, “just to manage the risk.’’ It’s about “just keeping it at a level where if there is a massive rip, I wouldn’t lose too much,’’ he said.
Tesla’s stock soared after the Nov. 5 election as the company’s fortunes became increasingly linked to CEO Elon Musk’s central role in Trump’s inner circle. Trump himself has gone to unconventional lengths to bolster Musk’s image and business directly. Just last week, he pledged to buy a Tesla during an event on the White House lawn at which several Tesla models were showcased.
The episode, which briefly buoyed Tesla’s share price, feeds into a never-ending churn of Tesla headlines since the election.
Many have focused on the electric vehicle maker’s woes in Europe. All have contributed to the stock’s volatility.
The Tesla shorts have learned that “when things start to go against you, you absolutely need to run for the hills,’’ Lekander said.
