Hedge fund short sellers have amassed a potential $16.2bn in profits as Tesla’s stock price has plummeted by 50% over the past three months, according to a report by the Financial Times citing data released by S3 Partners.
The dramatic decline in Tesla’s market value – down more than $700bn since mid-December – has also wiped over $100bn from CEO Elon Musk’s net worth.
Tesla has long been one of the most heavily shorted stocks in the US equity market. While hedge funds betting against the company suffered massive losses over the years – totalling $64.5bn since Tesla’s 2010 IPO – the recent decline has allowed them to recoup a portion of those losses.
The number of Tesla shares being shorted has risen 16.3% in the past month to 71.5 million shares, or 2.6% of the company’s total stock, as traders capitalise on broader market sell-offs triggered by concerns over US President Donald Trump’s aggressive tariffs.
The downturn follows Tesla’s disappointing fourth-quarter earnings and a warning from the company that Trump’s escalating trade war could expose it to retaliatory tariffs, increasing production costs.
Beyond financial concerns, Musk’s high-profile political interventions in Europe – including support for far-right parties – have alienated parts of Tesla’s historically progressive customer base, impacting sales in the region.
“Tesla had a very strong brand value, and Elon has managed to totally destroy it,” said Per Lekander, Managing Partner of $1.5bn hedge fund Clean Energy Transition, who has maintained a Tesla short position for years. “Musk is on the wrong side of his buyership. It’s not people with cowboy boots who buy Teslas.”
The post-election rally in Tesla shares has now been erased, with JPMorgan recently cutting its year-end price target to $120 from $135. Tesla’s stock closed at $238.01 on Monday.
Despite the turbulence, some institutional investors have increased their exposure to Tesla. Bridgewater Associates opened a new long position in Q4 2024, while ClearBridge, DE Shaw, and Norges Bank added to their stakes, according to 13F filings.
