Tesla’s stock rally following the recent US presidential election has been good for investors, but has spelled financial disaster for short sellers, or those placing bets against the electric vehicle (EV) maker.
Tesla’s stock price (TSLA) surged dramatically last week after Donald Trump’s election victory, rising nearly 40% within days and pushing Tesla’s market valuation above the $1 trillion mark for the first time in over two years. This translated into millions of dollars in potential profits for individual investors in the company. However, hedge funds and traders betting on a drop in Tesla stock, known as “short sellers,” are facing eye-watering losses.
According to data from S3 Partners, short-sellers have seen losses exceeding $5 billion since the election. Data from Hazeltree, which tracks hedge fund positions, showed that in the months leading up to the election, short positions in Tesla stock were significant, with around 17% of funds betting against it. (via Fortune)
However, many funds have since reduced their short exposure, with only about 7% still maintaining bearish positions.
The gains for investors, and losses for short sellers, reflect the influence Musk’s relationship with Trump may have on Tesla’s future. Musk, a prominent supporter of Trump, has aligned his strategies with the administration, which could potentially remove some of the regulatory “red tape” that Musk has long criticized, allowing Tesla to accelerate its advancements in Full Self-Driving (FSD) and artificial intelligence (AI) technology.
Tesla has hit a hit today so far of $358.64.
— Drive Tesla (@DriveTeslaca) November 11, 2024
It is currently up nearly 8% on the day at $345.36 pic.twitter.com/zmbdPdQqlw
Wedbush analyst Dan Ives recently raised his price target for Tesla to $400 per share, the highest among major brokerage firms, predicting substantial benefits for Tesla under Trump’s leadership. On the other side of the coin, Per Lekander, CEO of Clean Energy Transition, suggests that Tesla’s stock surge includes a “Trump premium,” reflecting investor expectations of favourable policies. However, should Trump’s support wane, such as a proposed freeze on Biden’s Inflation Reduction Act (IRA), Tesla’s stock could face challenges.
