Hedge funds that bet on Tesla's stock falling earned $16.2 billion, as the value of billionaire Elon Musk's company has halved over the past three months. This is reported by the Financial Times.
Traders who make money on share prices going down have accumulated major profits since the close of trading at a high on December 17. Tesla's value has fallen by more than $700 billion during this period, and Musk's fortune has fallen by more than $100 billion.
JPMorgan recently reduced its year-end price target for Tesla from $135 to $120, stating: "We struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly." As of Monday, Tesla's stock closed at $238.01.
Over the month, the number of Tesla shares in short positions increased by 16.3% to 71.5 million, or 2.6% of the company's total shares. This happened amid a sell-off in the US due to fears of the economic consequences of President Donald Trump's aggressive tariffs.
Why are Tesla shares going down?
- Over the years, Tesla has been one of the most popular companies for short selling in the US stock market: in the spring of 2020, the volume of such offers reached 300 million shares. However, the stock's rise of more than 1,500% by mid-2021 wiped out these bets.
- After Trump's victory in the US election, investors bought Tesla shares en masse, hoping that his proximity to the government would be beneficial. However, the recent drop in the stock has erased its gains.
- Elon Musk's public comments on European politics, including his support for far-right parties, have contributed to a decline in car sales in Europe. And his Department of Government Efficiency (DOGE)'s drastic cuts in government spending have caused a wave of discontent.
- Many owners of the company's electric cars are putting stickers on their cars saying "I bought this before Elon went crazy," or selling them altogether.
"Tesla had a very strong brand value and Elon has managed to totally destroy it," said Per Lekander, managing partner of the $1.5 billion hedge fund Clean Energy Transition. "It's not people with cowboy boots who buy Teslas."
- Musk also has a long history of mocking Tesla's critics, regardless of their size. Last year, he said that anyone who opens a short position will be eliminated when the company solves the autonomous driving problem.
Overall, volatility in the US stock market increased after Donald Trump returned to the White House. Although the market was initially "happy" about his election victory, it is now going through a difficult period.
