- Three Bay Resource long-short equity funds held by GMT Capital, a hedge fund run by Tom Claugus, each dropped about 10% in January fueled by a short position in Tesla, Bloomberg reported Thursday.
- Tesla stock has gained 83% year-to-date through Wednesday’s close.
- A number of investors have been burned by the automaker’s torrid rally, including David Einhorn and Crispin Odey.
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Shorting Tesla amid the stock’s record rally has led to losses for another hedge fund.
Each of GMT Capital’s three Bay Resource long-short equity funds with roughly $3.3 billion in combined assets dropped about 10% in January, fueled by a short position in Tesla, Bloomberg reported Thursday. Tesla gained 55% in the same timeframe.
Tom Claugus, who runs GMT, told Bloomberg in an interview that while Tesla “has done a good job getting to sustainability,” the company’s record valuation is “detached from reality.”
Tesla was just one factor in January’s loss, Claugus told Bloomberg. GMT’s short position in the automaker, which it’s held for years, is currently about 4.4% of its portfolio, according to Claugus.
He’s one in a growing pool of investors who have been burned by the Elon Musk-led automaker’s searing rally that’s sent the stock up as much as 250% from October 2019, when the company announced a surprise return to profitability in its third-quarter earnings.
In 2019, David Einhorn’s Greenlight Capital returned 14%, underperforming the broader market due in part to the fund’s short position in Tesla. As a whole, traders who had shorted Tesla were down about $2.9 billion in mark-to-market losses at the end of 2019, according to data from financial-analytics firm S3 Partners.
Short-seller pain has continued in 2020. At the beginning of February, short-sellers were already down as much as $8.31 billion in mark-to-market losses, according to S3 data. For the year through the close of trading Wednesday, Tesla has gained 83%.
It’s translated into more losses for hedge funds betting against Tesla. In January, a fund run by Crispin Odey of Odey Asset Management shed 11.2% due to short positions in the automaker, The Financial Times reported.
Others have exited short positions against Tesla as the stock continued to surge. Steve Eisman, of “The Big Short” fame, said in a February 5 interview with Bloomberg TV that he covered his short position “a while ago.”
“Everybody has a pain threshold, and when a stock becomes unmoored from valuation because it has certain dynamic growth aspects to it, and has cult-like aspects to it, you have to just walk away,” said Eisman, a senior portfolio manager for the Eisman Group at Neuberger Berman.
Some short-sellers have been emboldened by the stock’s parabolic rise. Andrew Left, who gained attention by betting against Valeant Pharmaceuticals, told MarketWatch on February 5 that he was again short Tesla, going back on a promise he made in 2018 to never be against the stock again.
Tesla is the most-shorted US stock by short interest, or dollar amount of shares borrowed to bet against, S3 data show. The automaker regained its position at the top of the most-shorted list in February, overtaking Apple.
- Markets Insider