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Hedge funds shorting Elon Musk’s Tesla just lost more than $5 billion
The connection between President-elect Donald Trump and Tesla CEO Elon Musk may seem like an unlikely one, but it has significant implications for the electric vehicle (EV) industry. In the aftermath of Trump’s victory, Musk’s fortune soared as Tesla’s stock price surged.
Shorting a volatile stock
Tesla has proven to be a difficult stock to short, even for experienced hedge funds. As of November 6, only 7% of hedge funds were net short Tesla, down from 17% in early July. This is despite the fact that almost one-fifth of hedge funds tracked by Hazeltree had built bets against Tesla in July, only to be badly wrong-footed after the company unveiled sales figures that triggered a steep rally.
The wider EV sector has lost more than 12% this year, based on the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF. In contrast, Tesla is up roughly 30% in 2024, after more than doubling its value last year.
Trump’s impact on clean energy
Renewables stocks spanning wind to solar have started to tank amid fears Trump will live up to his promise to slash clean-energy incentives. Lekander expects even Tesla to feel the sting of Trump’s anti-climate policies in about 12 to 18 months, as the Trump administration eliminates subsidies that Tesla has relied on.
Musk has lobbied for a role in Trump’s administration that would allow him to cut government bureaucracy and waste. Trump quickly latched onto the idea, publicly playing with the notion of a job as "Secretary of Cost Cutting" for the Tesla CEO.
A bridge between tech and Washington
Edward Lees, portfolio manager at BNP Paribas Asset Management, notes that Musk’s position of influence now is a bridge between the tech community and Washington. This could have significant implications for the EV industry and clean energy policies in the United States.
Musk’s fortune has soared in connection with the election outcome, adding $50 billion to his net worth in the days following the election. Lekander estimates that the Trump effect accounts for roughly a third of Tesla’s current share price of more than $300.
