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14 February 2020 10:35

Barnes & Noble Hedge fund Elliott Management Corporation

crispin odey

Why did this happen? Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy. Whether it be his "Stormy weather in Shortville" tweet from 2017, or the saucy "Who likes short shorts?" clip he posted less than a year later, Tesla's Elon Musk clearly relishes mixing it up with the naysayers, of which there are many. To be fair, betting against Tesla TSLA, +4.78%, at least during those turbulent stretches, has paid off handsomely in the past.

crispin odey

Not so in January. Just ask GMT Capital's Tom Claugus about that. The fund manager, who oversees some $3.3 billion in assets, told Bloomberg News that his three Bay Resource long-short equity funds shed about 10% each, pulling back as its short positions were rattled by Tesla's 55% rally. 'Valuation is detached from reality.' That's Claugus, who acknowledged Tesla is doing "a really good job getting to sustainability," standing by his bearish stance on the stock price. As Bloomberg points out, Claugus is not alone with all that red ink.

Other hedge-fund notables, such as David Einhorn and Crispin Odey, have been caught wrong-footed by Tesla's frantic charge to record highs. Overall, Tesla is the most-shorted U.S. stock, according to S3 data, regaining its position from Apple AAPL, -0.71% this month. Also read: Famed short seller Andrew Left tells MarketWatch why he is betting against Tesla's 'casino' Claugus has been short Tesla for years, and the position currently makes up more than 4% of his portfolio. But he was stung by more than just Tesla, he said. Long positions in the oil and gas and materials sectors also went against him. "The coronavirus is hitting anything that's cyclical and economically sensitive, so it's sort of a worst of all worlds for us," Claugus told Bloomberg. "When markets get this overheated I think it's a very risky period. The run-up has lasted for a long time and is turning into a little bit of a speculative bubble." On Thursday, Tesla shares bucked declines on the Dow DJIA, -0.43% and the S&P 500 SPX, -0.16% to push nearly 5% higher after announcing plans to offer about $2 billion of common stock in an underwritten deal, 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. Watch Tesla trade live on Markets Insider. Read more on Business Insider. 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.