4 Reasons Hedge funds fear burned again by Tesla short bets plot

Hedge funds whose short positions against Tesla backfired badly after the Nov 5 election are watching the latest sell-off from the sidelines, for fear of being burned again. Here are why:

1. After losing more than US$5 billion in the days after Donald Trump was voted back into the White House, Tesla short-sellers now have a position equivalent to just 2.5 per cent of the company’s publicly traded shares, according to data compiled by S3 Partners. That’s well below the historical average of about 23 per cent, according to Bloomberg-compiled data.

2. Tim Smith, managing director of data insights at Hazeltree, said the reality is funds that maintained their shorts against Tesla for extended periods in the past have lost money, which helps explain why they’re now “cautious.”

3. Kerry Goh, chief executive officer at Kamet Capital Partners, said his hedge fund hasn’t shorted Tesla since 2019. He views the current sell-off as “temporary” and warns that there’s “no predictable pattern” to shorting Tesla.

4. According to a recent survey by Morgan Stanley, 85 per cent of respondents think Musk’s political activities are having either a negative or an extremely negative impact on Tesla’s business. Despite such feedback, 45 per cent of those surveyed expect the stock to rise, compared with just 36 per cent who expect it to go down.

Lekander said it would be unwise to take out a large Tesla bet before June, which is when the company expects to launch an unsupervised self-driving taxi service. It’s a “really, really important event” for investors, he said.

My Take:

1. There are rumours that Actblue, a major democrats fund raising platform is behind the force to short Tesla stock. Hence retail investors need to be careful about posts by YouTubers and Influencers to encourage such action. You should manage the risks and trade based on your mean.

2. Elon Musk has claimed that a coordinated campaign is being waged against his company Tesla, alleging that multiple activist groups (like Actblue) are behind recent protests against the electric vehicle giant.

3. Tesla stock has risen about 8.1% after Q1 2025 earnings were released. Although earnings didn't meet expectation, there is no sign of the stock being bearish so far.

3. President Donald Trump signed a memorandum ordering Attorney General Pam Bondi to open an investigation aimed at ActBlue, the Democratic fundraising platform.The memorandum targets allegations of foreign donors and so-called "straw donors" in U.S. elections, and highlights ActBlue as potential violator, prompting top Democrats to accuse the administration of trying to "undermine democratic participation."