Hedge funds that bet against Tesla (TSLA, Financial) have suffered substantial losses since Donald Trump won the United States presidential election. Data from S3 Partners shows that these funds lost at least $5.2 billion from election day to the most recent market close. This financial blow is partly due to the unique relationship between President-elect Trump and Tesla's CEO, Elon Musk.
According to data tracking over 500 hedge funds, many have unwound their short positions on Tesla in recent months, coinciding with Musk's support for Trump. Musk, as the world’s richest person, has become one of the largest donors to Trump's campaign, aiming for a politically influential role in Trump's administration.
Per Lekander, CEO of Clean Energy Transition, admitted to losing money by shorting Tesla before the election but managed to minimize losses by reducing his positions. Since the election, Tesla's stock price has surged nearly 30%, adding over $200 billion in market value, forcing adjustments in strategies among hedge funds that previously shorted the company.
Data from Hazeltree indicates that as of November 6, only 7% of hedge funds are net short on Tesla, down from 17% in early July. Despite the risks, only 8% of hedge funds have taken net long positions on Tesla.
Tesla has proven to be a challenging stock for short sellers, even as other electric vehicle companies face trade tensions, weak consumer demand, and increased competition. While nearly a fifth of hedge funds tracked by Hazeltree were shorting Tesla in July, many were caught off guard by a significant stock price increase following positive sales data.
The broader electric vehicle sector, as measured by the KraneShares Electric Vehicles and Future Mobility Index ETF, has declined over 12% this year, whereas Tesla's value has risen approximately 30%. In contrast, renewable energy stocks have started to decline amid concerns about Trump's potential policy shifts away from clean energy incentives.
Despite the connection between Trump and Musk, some experts, including Lekander, believe Trump's presidency could negatively impact Tesla due to potential cuts in subsidies. Musk has been actively lobbying for a role in the Trump administration, proposing the idea of a "cost-cutting minister" to reduce bureaucratic inefficiencies.
Edward Lees, a portfolio manager at BNP Paribas Asset Management, views Musk as a bridge between the tech industry and Washington. He has previously held Tesla shares but did not disclose his current position.
