Hedge Funds Lose Billions After Betting Against Musk And Trump
1min read Since the election results were announced and former President Trump declared victory, Elon Musk, CEO of Tesla and a major donor for his campaign, has also won big.
As of last Friday's stock market close, Tesla's stock price soared by 8.19% in a single day, and its market value also stood firmly above the $1 trillion mark. Musk's net worth has also returned to the $300 billion mark after nearly three years. This has caused those hedge funds that persisted in shorting Tesla to lose tens of billions of dollars.
Media calculations based on data compiled by S3 Partners show that in just a few days between the election day last week and the close on Friday, those hedge funds shorting Tesla suffered at least $5.2 billion in paper losses.
It is worth mentioning that Tesla's performance and the entire U.S. electric vehicle industry are not optimistic. Therefore, analysts believe that Tesla's stock price can pick up again only because the company's Musk has heavily bet on Trump's presidential campaign.
Data shows that in this election cycle, Musk provided more than $130 million in funds for Trump and other Republicans. In addition, Musk has also frequently campaigned for the Republican Party on his social media network X, attacking Democrats. Trump has mentioned on several occasions that he will appoint Musk to lead the Government Efficiency Committee.
Some analyses say that Trump has promised Musk a great deal of power because he has made it clear that he plans to reward loyalists.
Edward Lees, portfolio manager at BNP Paribas Asset Management, said that Musk's influence "can now be described as a bridge between the technology world and Washington."
Since the election on November 5th, Tesla's stock price has risen by nearly 30%, and its market value has increased by more than $200 billion. Against this backdrop, hedge funds that had previously shorted the company have since changed direction.
Weekly data from Hazeltree, which tracks positions of more than 500 hedge funds, shows that as of November 6th, only 7% of hedge funds were net short on Tesla, down from 17% in early July.
Per Lekander, CEO of hedge fund management company Clean Energy Transition said he slightly shorted Tesla before the election. However, he later managed to reduce his position quite a bit, which means his losses were ultimately quite small.
"But we have lost some money," he said.
Lekander believes that the Trump effect accounts for about one-third of Tesla's current stock price of over $300. He said, "So now Tesla's stock is more like a gamble on how much Trump can help Elon."