Long-suffering Tesla short sellers finally have something to cheer about. After ending 2023 with more than $12 billion in mark-to-market losses, the stock’s fall this year has led to market-beating profits for the shorts.
Chris Brown’s Aristides hedge fund netted more than 5.24 percent last month, with more than half of that coming from its Tesla short, according to a letter to investors. That made January 2024 the hedge fund’s best-ever January, Brown said.
Elsewhere, one of the most well-known and vociferous Tesla bears, Stanphyl Capital’s Mark Spiegel, noted in his January letter to investors that the fund was up year-to-date approximately 15.6 percent net of all fees and expenses — in no small part due to its Tesla short.
Altogether, Tesla short sellers have booked $5.28 billion in 2024 mark-to-market profits, representing a gain of about 30 percent, according to Ihor Dusaniwsky of S3 Partners.
In contrast, the S&P 500 was up 1.7 percent in January.
“This month our large Tesla short position worked nicely as the stock finally began reflecting the fact that its growth story is as dead as its batteries in a Chicago winter,” Spiegel wrote investors, linking to a news article about how cars have trouble charging their batteries in the cold Northern climate — unlike the temperate oasis of California, where they were first created.
Tesla shares have fallen about 25 percent this year, knocking the stock off what CNBC’s Jim Cramer has pegged as the “Magnificant Seven.” (Apple, Microsoft, Alphabet, Meta, Amazon, and Nvidia are the other six stocks on the list.) In fact, Tesla is now the worst performing stock of the S&P 500 year-to-date.
“Musk has done a lot this year to damage the brand’s cache/cool factor with many Americans,” noted Brown, arguing that “the vast majority of Tesla shareholders seem to believe completely nuts stuff about the company’s positioning in robotics, AI, self-driving, etc.”
But he argued that “we seem to be on the back half of the hype curve, where there are more people waking up to reality each day than there are new cult members.”
Brown said that “With a $600 billion market cap, at 46 times 2025 GAAP earnings estimates, and 4.4x 2025 enterprise value to revenue, with no new products for a while other than the ridiculous Cybertruck, Tesla is an illustration of the rare time that we actually feel great about a ‘valuation short.’”
A recent Wall Street Journal report alleging that Musk pressured board members into drug use has added more pressure to the stock, after Musk’s $55.8 billion pay package was blocked by a Delaware judge last week.
The news just added to the downward momentum in Tesla shares ever since Musk sold big chunks of stock to pay for his controversial takeover of Twitter. Despite last year’s runup in the stock, over the past two years, Tesla shares are down almost 40 percent. (Twitter, meanwhile, has lost more than 70 percent of its value based on Musk’s purchase price, according to a write down by Fidelity, which was one of the leveraged buyout’s initial investors.)
Spiegel has outlined a litany of alleged transgressions by Musk.
In past years, he noted that Musk had claimed that Teslas would be self driving by 2018, but the National Highway Traffic Safety Administration “recently forced Tesla to make its cars less self-driving via an upgrade of its driver monitoring system (an action safety experts say was highly inadequate, making more severe restrictions likely).”
He called this the basis of a “huge consumer fraud” that could cost Tesla millions.
Spiegel also pointed to a December Reuters expose of the company’s “deadly and financially fraudulent multi-year cover-up of defective suspensions” that led to calls for a massive recall by Democratic senators Richard Blumenthal of Connecticut and Edward J. Markey of Massachusetts — both staunch consumer advocates.
And there is more. According to the WSJ, the Department of Justice is investigating Musk on a variety of issues, including his alleged attempted theft of company assets to build a house. The WSJ said the DOJ is “pursuing potential criminal charges. “
In its latest 10-K, the company has confirmed that it has received multiple subpoenas. “Whether from these crimes or something else, Musk will go down because fraudsters like him always do…” predicted Spiegel.
