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A Risky $3.3 Billion Bet on the Fall of Tesla and Elon Musk


Elon Musk does not like investors and financiers to bet on Tesla’s stock-market collapse.  

Last May, the richest man in the world attacked Bill Gates, who formerly was the richest man in the world, because the Microsoft  (MSFT)  co-founder had a short position of $500 million against Tesla  (TSLA) . Selling stock short is a bet that the price will drop.

“Sorry, but I cannot take your philanthropy on climate change seriously when you have a massive short position against Tesla the company doing the most to solve climate change,” Musk recently wrote to Gates. It was the end of a discussion the two billionaires were having about working together for common causes.

The mogul later accompanied his criticism with an unflattering and cruel tweet aimed at Gates.

A $3.3 Billion Bet

For the moment, Tesla is acclaimed by investors, since the maker of the Model 3 and Model S sedans is the world’s sixth largest company by market value. Its market capitalization at last check was $901 billion. That gives Musk the last word.

But this position hasn’t prevented financiers from betting against him and Tesla. The latest: Scott Burg, chief investment officer of Deer Park Road Management, Steamboat Springs, Colo.

According to a recent Securities and Exchange Commission filing, Burg acquired put options on 4,786,400 Tesla shares as of June 30. The value of these derivative instruments was $3.3 billion as of June 30.

A put option grants the holder the right but not the obligation to sell shares of an underlying security on or before a specific date at a particular price. When an investor acquires a put option, they are bearish about the future performance of the underlying stock.

Tesla shares ended the second quarter at $673.42; at last check, they’re trading around $863. Tesla shares have gained 28% since the end of the second quarter. This means Burg’s bet hasn’t paid off, at least not yet.

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The financier recently deleted his Twitter account after being contacted by Bloomberg News about this latest bet. The bet is not surprising, however, as Burg has been predicting the downfall of Tesla and Musk for many years now.

“Now Tesla will be squashed like a bug,” the financier predicted on Dec. 22, 2020.

Prior to deleting his account, Burg regularly posted messages on Twitter using the hashtag #TSLAQ. This symbol is used on social media by the most extreme critics of Musk and Tesla. They are convinced that the manufacturer of electric vehicles will go bankrupt. (The “Q” until 2016 was placed at the end of a Nasdaq stock symbol to indicate that the company had filed under the bankruptcy laws, according to Investopedia.)

“‘Do you know what a death spiral is? Coming,” Burg tweeted on May 20, according to records kept by Tesla fans on the platform. That day Tesla shares had fallen more than 6%.

Tesla Has Been a Disaster for Short-Sellers

Deer Park Road Management specializes in distressed-credit opportunities. Early in August Deer Park’s founder and CEO, Michael Craig-Scheckman, and Burg, who is managing partner and chief investment officer, held a conference call to discuss the Credit Cycle Rotation and Distressed Credit Opportunities, according to a post from the company’s official Twitter account.

Burg’s bet is surprising because Tesla dominates the EV market and almost all automakers want to develop electric models. The company is also ahead in autonomous vehicles and has an extremely busy roadmap for the next two years, notably with the launch of the highly anticipated Cybertruck, a futuristic pickup/truck.

The financier is not the first to make a huge bet against Tesla. Hedge-fund heavyweight David Einhorn of Greenlight Capital has paid a serious price. Musk literally had shorts delivered to Einhorn in 2018, when Tesla was on the brink of the financial abyss.

“I want to thank @elonmusk for the shorts,” Einhorn posted on Twitter on August 2018 with a photo of the shorts. “He is a man of his word! They did come with some manufacturing defects. #tesla.”

“Put them on & post a selfie,” Musk commented.

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