Trump's victory "boosts" Tesla's stock price, causing significant losses for hedge fund short sellers

According to Zhitong Finance, since Trump won the election, hedge funds that have been shorting Tesla (TSLA.US) due to Musk's prominent performance in the U.S. elections have lost billions of dollars. Data compiled by S3 Partners estimates that hedge funds shorting Tesla incurred paper losses of at least $5.2 billion from election day last week to Friday's close. Another report from Hazeltree, which tracks the positions of over 500 hedge funds, shows that as many peers have unwound their short positions on Tesla over the past four months, the number of losing shorts has also decreased; this adjustment in positions coincides with Musk's support for Trump on July 13.

Musk has become Trump's biggest billionaire fan. He has injected significant funds into Trump's campaign using his status as the world's richest person, making him one of the largest donors for the 2024 election. Betting resources on the incumbent president has now given Musk a politically influential position, as Trump has made it clear that he plans to reward those who support him.

Per Lekander, CEO of hedge fund management company Clean Energy Transition, stated that he "slightly shorted Tesla before the election." He managed to reduce his position "quite a bit," meaning his losses were ultimately "quite small." However, he remarked, "But we did lose some money."

Since the election on November 5, Tesla's stock price has risen nearly 30%, adding over $200 billion to its market value. Against this backdrop, hedge funds that previously shorted the company have since changed direction. Weekly data from Hazeltree shows that as of November 6, only 7% of hedge funds were net short on Tesla, down from 17% in early July. This means that only 8% of them were net long on the stock.

It has proven that Tesla is a dangerous stock for shorts, despite other companies in the electric vehicle industry facing adverse factors such as trade tensions, weak consumer demand, and increased competition. In July of this year, nearly one-fifth of the hedge funds tracked by Hazeltree were shorting Tesla, but they were caught off guard when the company's sales data led to a significant rise in stock price.

Meanwhile, according to the performance of the KraneShares Electric Vehicles and Future Mobility Index ETF, the entire electric vehicle industry has fallen over 12% this year. Prior to this, the decline for 2023 was about 9%. In contrast, after more than doubling its market value last year, Tesla has risen about 30% in 2024 Tesla's performance has also stood out among green stocks compared to others. As the market digests the news of Trump's victory, renewable energy stocks from wind to solar have begun to decline, with concerns that Trump will fulfill his promise to cut clean energy incentives. However, Lekander stated that more than a year later, he expects even Tesla to feel the sting of Trump's anti-climate policies.

Despite the connection between Trump and Musk, Lekander believes that "Trump's victory is very negative for Tesla as a car company," and that within about 12 to 18 months, the Trump administration will "eliminate many of the subsidies that Tesla truly benefits from."

Musk has been lobbying to play a role in the Trump administration to reduce what he calls government bureaucracy and waste. Trump quickly embraced the idea, publicly proposing the establishment of a "cost-cutting secretary" for Musk.

Edward Lees, a portfolio manager at BNP Paribas Asset Management, pointed out that Musk "can be seen as a bridge between the tech world and Washington." Lees stated that he "has held Tesla shares at different times," but did not elaborate on his current position.

Musk publicly expressed support for Trump after the assassination attempt on Trump in July this year, and his own wealth soared with the election results. According to the Bloomberg Billionaires Index, Tesla's stock price surge in the days following the election increased his net worth by $50 billion. Previously, Musk managed a business empire of six companies, including X and SpaceX, and spent over $130 million on Trump and Republican candidates during the fiercely competitive presidential and House elections.

Lekander stated that he believes the Trump effect contributes to about one-third of Tesla's current stock price of over $300. Lekander said, "So now Tesla's stock is more like a bet on how much Trump can help Musk."