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The Tesla short-sellers were once a vocal group of investors backed by a variety of top-tier investors. We’re talking about billionaire investors Jim Chanos and David Einhorn and two of the investors featured in the Big Short. But after Tesla’s exponential rise from approximately $36 per share to over $1,200, the Tesla short-sellers seem to have disappeared. The years of chaos between the short sellers and Elon Musk was the longest and most unprofitable short in history. So what happened to the short-sellers and where are they today?
The Tesla short-sellers are not just a group of unfortunate fund managers, but rather a group of powerful men that almost took down Tesla. Elon Musk’s battle against the Tesla short sellers is a personal fight. In Elon Musk’s own words, short-sellers are value destroyers and should be banned. With that being said, we have to talk about the most notorious short-seller of them all, which is David Einhorn. Einhorn first started shorting Tesla stock in 2016, where he called Musk a promotional CEO. David Einhorn’s assets under management, or AUM in short form, were over $15 billion at the start of 2016. That is obviously a large amount, and for a great reason. Einhorn had a phenomenal track record, as he had a history of generating above-average returns. Unbeknownst to Einhorn, the start of his Tesla short marked the end of his career. In 2019, Einhorn presented his brilliant idea at CNBC’s Sohn Conference: Tesla was going to fail. He thought Elon Musk was going to make a mistake, and made it clear from his slideshow of quotes from Musk. A few months after that, Einhorn accused Musk of “significant fraud.” Elon Musk had enough of it, and proceeded to fire back at Einhorn. Elon even went as far as to call him Mr. Unicorn. His letter said, “Dear Mr. Unicorn (fabulous name by the way), We read your Greenlight Capital Q3’19 Investor Letter, in which you make numerous false allegations against Tesla. It is understandable that you wish to save face with your investors, given the losses you suffered from Tesla’s successful third quarter, especially since you’ve had several down years in performance and a sharp drop in assets under management from $15 billion to $5 billion. You have our sympathies.” Musk further explained Tesla’s recent developments, and then offered a tour of Tesla’s facilities and short shorts. He then ended the letter by saying “Regards, Treelon Musk.” Following Tesla’s exponential rise, Einhorn admitted that his Tesla short position was his biggest loser in 2020. Tesla stock increased by roughly 8 times in value in 2020, and it clearly detrimentally harmed Einhorn’s fund. As if it couldn’t get worse, Tesla’s recent move upwards likely marks the end of Einhorn’s career. Einhorn’s assets under management have dropped all the way down to $1.5 billion in the latest SEC filing, and is likely much lower right now. Keep in mind that he started with $15 billion in 2016, so his current AUM is only 1/10th of what he started with when he first shorted Tesla. Another one of the most renowned short sellers of Tesla is a hedge fund manager named Jim Chanos. Chanos first gained traction when he shorted Enron, one of the biggest frauds in history. Following the 2008 recession, when almost everything crashed, Chanos was managing over $7 billion. Unfortunately for Chanos, his performance was incredibly lackluster in the following decade. In 2015, Chanos announced that he was shorting Tesla stock based on Tesla’s valuation. By 2018, Chanos only had $2 billion under management, which was significantly lower than his previous AUM of $7 billion. As the market continued to increase, Chanos’s fund kept on crashing. At the end of 2019, his fund only managed $932 million. Chanos previously made money ⅔ of his short positions, but now that percentage dropped to ⅓.
Tesla’s exponential rise was the nail in the coffin for Chanos. In the middle of the pandemic, Chanos announced that he was still “maximum short” on Tesla. Tesla stock was down at the time, but we all know how that panned out at the end.
Chanos’s bold claim did not end well. Tesla stock proceeded to rise by almost 5 times in value by the end of 2020.