Short Sellers Are Making a Fortune as Tesla's Stock Collapses

They're making billions -- and Musk can't stop dragging the brand through the mud.

Short Cake

Tesla short sellers are making bank after CEO Elon Musk announced that he's doubling down on creating his own political party in the US, further shredding the brand and its tattered valuation.

The company's shares slumped nearly seven percent on Monday, wiping out more than $68 billion in market cap. Investors who were shorting the EV maker — betting against its success, basically — were on track to reap roughly $1.4 billion in profits, Reuters reports.

Traders were spooked by Musk announcing that he was launching an "America Party," a declaration of war designed to counter both Democrats and his friends-turned-enemies in the Republican Party.

"When it comes to bankrupting our country with waste and graft, we live in a one-party system, not a democracy," he tweeted over the weekend.

However, investors were furious, questioning his commitment to leading the carmaker. Tesla has already suffered greatly under Musk's absentee leadership style. His embrace of far-right extremist ideologies before and during his tenure as the unofficial lead of the so-called Department of Government Efficiency has dragged the company's brand through the mud, eviscerating sales and leaving a massive hole in the company's finances.

Going Short

Meanwhile, short sellers are seemingly having the last laugh. On June 5, Musk's erupting feud with president Donald Trump led to Tesla's shares plunging 14 percent, an all-time record. That day alone, short sellers made over $4 billion in profits, per Reuters.

Between January and April of this year, those who bet on a decline in the company's stock price generated a whopping $11.5 billion in profits.

Besides abysmal financials and plummeting sales, the company's long-awaited launch of a robotaxi service has been mired in technical difficulties and terrifying close calls.

The reality that short sellers are making billions likely won't sit well with the carmaker's controversial leader. For many years now, Musk has been infuriated by investors betting against Tesla.

"Shorting is a scam," he tweeted in 2021, in the midst of the Wall Street Bets saga. "Legal only for vestigial reasons."

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