Tesla Stock Surge: Who are the Winners and Losers?

Tesla (TSLA) has been on a rising spree since its earnings. In October, Tesla stock surged by 31%. The stock rose on the back of third-quarter profits. Markets expected a loss in the quarter. However, TSLA stock jumped sharply on better-than-expected results.

While the Tesla stock surge bought in good news for some, it bought horrible news for others. Tesla, an electric car company, lost money in the past quarters. However, it has made some considerable strides in terms of expansion on a global scale. Markets are divided on Tesla stock with critics on the one hand and praisers on the other side. Notably, the Tesla stock surge hit the critics hard.

Tesla’s stock surge sharply impacted the short sellers. According to the New York Post report, short sellers lost about $1.5 billion in one day on Tesla stock. Fund managers like Jim Chanos and David Einhorn lost a big chunk of money on Tesla stock surge. Einhorn’s Greenlight Capital (GRLE) lost about 6.3% across its funds in October, perhaps led by Tesla stock. To learn more, read Tesla Stock Gains Dim Einhorn’s Greenlight. Also, per the report, S3 Partner’s managing director Ihor Dusaniwsky said, “This was the worst loss that we’ve to see.”

For various reasons, investors were short on Tesla stock. In May, a CNBC report said that Blaine Capital’s founder William Smith “is short on Tesla because of the company’s management, products, and ‘toxic’ balance sheet.” Also, Berkshire Hathaway’s Warren Buffet sees “room for improvement” in Tesla’s CEO Elon Musk.

According to CNN Business, Sumitomo Mitsui DS Asset Management Co, GLC Asset Management Group Ltd, GVO Asset Management Ag, Gateway Investment Advisers LLC, Alaska Retirement Management Board, and Lyxor Asset Management SAS were the sellers of TSLA  stock as per their latest filings. Perhaps, these institutions missed, partially or fully, on the rally in Tesla stock.

However, Wall Street analysts are concerned about the latest results. JP Morgan analyst feels that he isn’t sure that Tesla’s profits are a turnaround quarter for the company. Further, analysts at Bank of America, Bernstein, and RBC have expressed discomfort about Tesla. This is due to the company’s revenue fall, reduced costs, expected margin pressure due to the Shanghai factory, and an estimated demand slump in Q1 2020.

Bulls of Tesla stock are enthusiastic about Tesla’s results. Ark Investment Management, which has a $4,000 target on Tesla stock, sold some TSLA shares. However, they firmly believe in the company’s growth story. On the company’s third-quarter profits, Ark’s founder and CEO Catherine Wood said, “This is quite dramatic.”

Further, the biggest beneficiary of the TSLA stock surge is Musk. According to a Forbes report, he holds roughly 22% in Tesla stock, which is about half of its wealth. Also, the report says that the rise in TSLA post-earnings raised Musk’s net worth by nearly $2 billion.

Besides Musk, there are a series of institutional buyers in the stock that can gain from the stock surge. According to CNN Business, as on September 30, 2019, the New Jersey Division of Investment purchased about 98,300 Tesla shares. Also, Kames Capital and Nordea Investment Management bought Tesla stock to the tune of 14,900 shares and 14,800 shares on September 30 and August 30, respectively.

Tesla’s peers had a mixed performance in October. Ford Motor (F) and General Motors (GM) shrunk by 6.2% and 0.9%, respectively, in the month. However, Ferrari (RACE) and Fiat Chrysler (FCAU) rose by 3.9% and 18.3%, respectively.

Ford stock declined due to a downward revision in its earnings guidance for 2019. Though Ford’s earnings beat estimates, the company’s position worsened in China. Further, General Motors stock surged on better-than-expected earnings. GM stock, which was on a falling spree since the beginning of its 40-day long UAW strike, recovered on earnings.

Also, Ferrari stock, which has yet to report results, rose in October in anticipation of earnings. Finally, Fiat surged on the news of a merger with Peugeot owner PSA Group. The merger will create the world’s fourth-largest automaker.