How Tesla Stock Short-Sellers Profited $4 Billion Amid Elon Musk and Trump’s Split

Short sellers had a big win recently when Tesla shares dropped 14%, marking their biggest one-day decline in over a year. This downturn resulted in a hefty $4 billion profit for those betting against the stock. Experts noted that such a significant drop in stock price may signal deeper issues beyond simple market fluctuations.

On June 8, 2023, Tesla’s trading volume spiked to 275 million shares, a level not seen since it entered the S&P 500 in 2020. This surge suggests that major institutional investors, not just individual traders, were selling off their shares. Earlier that week, the volume was below 100 million, but events between Elon Musk and former President Trump changed the landscape rapidly.

Amid escalating tensions, options trading also skyrocketed. Traders executed a record four million put contracts in one day, which is four times the daily average. Danny Kirsch from Piper Sandler pointed out that Musk’s relationship with Trump could greatly influence investor sentiment. Historically, being in the good graces of the administration has provided Musk and his companies with significant advantages.

The feud between Musk and Trump began when Musk criticized a spending bill that didn’t align with his interests, calling it a “disgusting abomination.” Trump retaliated with threats to cancel Musk’s federal contracts, which raised eyebrows among financial managers. The immediate concern is that legal scrutiny of Musk’s businesses could intensify, especially since past actions within the Trump administration allegedly shielded him from millions in potential liabilities.

There’s historical context here; back in 2020, Tesla faced challenges when it was not included in the S&P 500, triggering a similar sell-off. However, this latest dispute may carry more weight due to Trump’s reputation for vengeance. Experts worry that this could lead to a more profound fallout, not just for Musk but also for Tesla’s stock valuation long-term.

User reactions on social media reflect a mix of disbelief and intrigue regarding this feud. Many are keeping a close eye on how market dynamics could change in light of Musk’s public statements and Trump’s aggressive responses.

In summary, Tesla’s recent stock behavior reflects more than just investor sentiment. It shows a growing concern amongst institutional investors about Musk’s standing and the potential repercussions of his clashes with powerful political figures. While past performance may inform future actions, the current environment feels distinctly different, raising questions about what the future holds for Tesla and its CEO.



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