Hedge funds that had short positions against Tesla Inc. have incurred significant losses, amounting to more than $5 billion, as the company’s stock price has surged following the election of Donald Trump.
This rise in Tesla’s value is partly attributed to the growing political ties between the electric vehicle maker’s CEO Elon Musk and President-elect Trump.
According to data from Bloomberg and S3 Partners, hedge funds that held short positions against Tesla between Election Day and early November suffered on-paper losses of at least $5.2 billion. This comes after a notable shift in hedge fund strategies, as many of these investors began unwinding their short positions in response to Tesla’s market rally. Tesla shares rose nearly 30% since the US election on November 5, adding more than $200 billion in market value.
The reversal of fortunes for Tesla’s short-sellers coincides with Musk’s vocal support for Trump, particularly after the CEO endorsed the president-elect in July 2024. Musk’s backing of Trump, alongside his role as a major donor to Trump’s campaign, has positioned him as one of the president’s most influential billionaire allies. This special relationship appears to have contributed to a more favorable outlook for Tesla, with some hedge funds adjusting their positions accordingly.
As of November 6, only 7% of hedge funds held short positions on Tesla, down from 17% in July. However, only 8% of hedge funds were net long on the stock, indicating a cautious stance overall. Tesla’s performance stands in stark contrast to the broader electric vehicle sector, which has struggled this year, losing more than 12% of its value. Tesla, by contrast, has seen its stock price rise by 30% in 2024, following a 100% increase in 2023.
Despite the positive outlook for Tesla, some analysts warn that the company could face challenges under a Trump administration, particularly if his policies reduce subsidies and incentives for the green energy sector. Per Lekander, CEO of hedge fund Clean Energy Transition, although Tesla has benefited from government support, the Trump administration’s stance on clean energy could pose risks for the company in the coming years.
Musk’s close ties with Trump have also sparked discussions about potential roles for the Tesla CEO in the new administration. Musk has expressed interest in helping to streamline government operations, with Trump even suggesting a role as “Secretary of Cost Cutting” for Musk. This unique political influence, however, may ultimately tie Tesla’s fortunes to the success of Trump’s policies, which could create volatility for the company in the long run.
The latest news in your social feeds
Subscribe to our social media platforms to stay tuned