Short sellers have made $16.2 billion (A$25.5 billion) in profits over the past three months as Tesla’s share price has plummeted by more than 50%. Since 17 December 2024, the company’s market value has dropped by over $700 billion, erasing more than $100 billion from Elon Musk’s net worth.
The decline follows a combination of political controversy, weakening sales, and economic headwinds. Musk’s public endorsement of far-right parties in Europe has alienated key Tesla customers, leading to declining car sales in the region. In the US, his role in federal spending cuts as head of the Department of Government Efficiency has triggered backlash, while Tesla has warned that Trump’s aggressive trade tariffs could drive up the cost of production.
With investor confidence eroding, hedge funds have ramped up their short positions on Tesla by 16.3% in the past month, now covering 71.5 million shares, or 2.6% of Tesla’s total stock. This is a sharp reversal after years of short sellers being burned, with paper losses totalling $64.5 billion since Tesla’s IPO in 2010.
JPMorgan has slashed its year-end price target for Tesla to $120, warning that the collapse in brand value is unprecedented in the history of the automotive industry. The company’s fourth-quarter results in January fell short of expectations, and Tesla’s stock has now erased all of its post-election gains, which had been fuelled by speculation that Musk’s influence in Trump’s administration would boost the company’s prospects.
Musk, who has a history of taunting short sellers, previously said those betting against Tesla would be “obliterated” once the company solved autonomy. But as Tesla’s stock tumbles, critics argue that Musk’s own actions have done more harm to the company’s value than any external factor.
Despite the ongoing slide, some institutional investors remain bullish. Hedge fund Bridgewater Associates recently opened a long position in Tesla, while ClearBridge, DE Shaw, and Norges Bank have all added to their stakes.
