Short-sellers took huge losses on FTSE 100 companies in the past month as share prices rebounded, while one UK fund manager has stepped down after a disastrous shorting of Tesla Inc (NASDAQ:TSLA).
James Clunie has parted company from Jupiter Fund Management PLC (LON:JUP) after several calamitous calls hit the performance of the Jupiter Absolute Return fund, which he has run since 2013.
The fund is down 17.6% since the start of 2020, with annualised losses of 8.5% over three years.
As well as taking a short position in Tesla, which turned out rather badly with the electric car maker’s stock rocketing over 600% since January, Clunie’s other shockingly bad shorts have included Amazon (NASDAQ:AMZN), Netflix Inc (NASDAQ:NFLX) and Chinese electric vehicle maker Nio Inc (NYSE:NIO).
Short sellers in London’s blue-chips have also suffered losses of £1.1bn in the month of November as the positive news about coronavirus vaccines triggered a market melt-up and crushing short positions, according to data from Ortex Analytics.
Last month’s figures more than cancelled out the £828mln gains made by short sellers in October and well exceed the £420mln from previous loss-making month in August.
BHP Group PLC (LON:BHP), Royal Dutch Shell PLC (LON:RDSB) and Rolls-Royce Holdings PLC (LON:RR.) were the biggest loss-maker for short-sellers in November.
Their rising shares resulted losses of £249.4mln, £158.6mln and £157mln, respectively, according to Ortex’s calculations.
They were followed Pearson PLC (LON:PSON), at £115.3mln, and HSBC Holdings PLC (LON:HSBA) at £83.9mln.
“Whilst it may be little consolation to those nursing huge losses, a return to more normal market conditions is a good thing, even for short sellers,” said Peter Hillerberg, co-founder of Ortex.
“The past eight months have been unprecedented and have required many traders to adapt their strategies or develop new ones altogether. With monthly losses like those we’ve seen in November, many will be looking forward to the moment they can dust down their tried and tested approaches and get back to something like normal trading.”
Tesla share issue
Tesla shares hit a record close of $641.76 on Monday but are expected to fall on Tuesday after the company applied to raise US$5bn from issuing new stock, its second fundraising in three months.
The capital raise plan comes on the back of a near 65% gain since the end of October, helped by the planned addition to the S&P 500 index, taking the market capitalisation to almost $6bn to make it the sixth most valuable US company.
Analysts at Wedbush said the stock issue further solidifies his ‘bull case’ target price of US$1,000, with the broker’s base price target of US$560 having already been surpassed.
They hailed the move for boss Elon Musk as a “smart move at the right time… after the parabolic rally in shares with the appetite strong among investors to play the transformational EV trend through pure play Tesla over the coming years”.
With major gigafactory construction projects on the horizon in Austin and Berlin, Wedbush said Tesla was “now in a clear position of strength and out of the red … Musk and his red cape are raising enough capital to get the balance sheet and capital structure to further firm up its growing cash position and slowly get out of its debt situation, which throws the lingering bear thesis for Tesla out the window for now”.
Jupiter’s Clunie has previously said that his short bet on Tesla was just that he thought the company’s stock was overvalued, something that Musk himself has said many times.
On his short positions, Clunie told website Morningstar, “What I’ve done is what I call ‘sensible’ stuff and maybe that’s my weakness: it’s too logical, it’s too evidence-based, it’s too sensible.”