Elon Musk won't see a famous face at the Tesla shareholder meeting being held in Austin, Texas on May 16.
This face is that of his billionaire peer George Soros. The reason for the absence of the most famous short seller in the world is simply that he is no longer a shareholder of the manufacturer of electric vehicles, as of March 31.
According to regulatory filings, Soros Fund Management (SFM), the financier's hedge fund, liquidated all Tesla shares acquired since the second quarter of 2022. SFM had surprised everyone by adjusting its investment strategy in the automotive industry starting that quarter.
The billionaire who was content to bet on EV upstarts like Lucid Motors (LCID) and Rivian (RIVN) also disclosed a stake in Tesla. He first acquired 29,883 Tesla shares. This stake in Tesla was valued at just over $20.1 million as of Jun. 30.
He continued to trust the Austin, Texas-based group and its charismatic and whimsical CEO Elon Musk, taking advantage of a stock plunge of more than 50% between January and September 2022 to triple his stake to 89,647 Tesla shares as of Sep. 30.
Soros Bet on Tesla
The big investment suggested that Soros believed in Musk's strategy for Tesla, despite the billionaire being distracted by his $44 billion acquisition of Twitter. At the time, the Techno King was in a legal battle with Twitter 1.0 management, and spoke very little about Tesla. The fundamentals of Tesla were very solid. For the third quarter, it had posted adjusted earnings before interest, taxes, depreciation and amortization of almost $5 billion, up 55% year-over-year, while revenue jumped by 56% to $21.5 billion.
It had delivered 907,573 vehicles in the first nine months of 2022, up 45% year-over-year, and had produced 927,910 cars, up nearly 49%.
In the fourth quarter of 2022, Soros continued his strategy of acquiring Tesla shares. He held 132,046 shares as of Dec. 31, according to filings with the U.S. Securities and Exchange Commission. This represented an increase of 42,399 shares, compared to Sep. 30. His stake in Tesla was then valued at nearly $16.27 million.
What is interesting to observe is that the famed corporate raider had continued to acquire Tesla shares as the maker of the Model Y SUV was suffering a stock market rout. In all, Tesla shares lost 65% of their value last year.
Three months later, Soros has sold all of his Tesla shares. He held no position as of Mar. 31, according to new filings with the SEC.
Potential Losses
It is unclear what prompted Soros to sell all of his Tesla position, but it's important to note that Tesla's stock price rebounded 68.4% in the first three months of the year, after the group published sparkling results on Jan. 25, with a 2022 net profit of $12.6 billion. The group intends to produce up to 2 million vehicles in 2023, after having manufactured 1.37 million last year. To this good news, one must add the beginning of the production, later this year, of the Cybertruck, the firm's very first pickup truck. This vehicle is perceived as a future cash cow, since its order book is full and the expectations it arouses are very high.
In the category of bad news, Tesla has significantly lowered the prices of its vehicles, including the very popular Model Y and Model 3. This results in lower margins. In addition, the competition is catching up. In other words, there are more EVs on the market.
Soros' investment in Tesla hasn't been a particularly lucrative one. In the best-case scenario, it earned him $3.8 million, assuming he acquired the shares at the lowest possible price in the second ($209.39), third ($227.26) and fourth ($109.10) quarters of 2022 and sold at the highest price ($214.24) during the first quarter of 2023.
In the average scenario, Soros lost $9.8 million. This assumption assumes that he acquired Tesla shares at the average price per quarter and sold them at the average price also in the last quarter.
In the worst case scenario, the legendary investor lost $26.2 million in total. This scenario, like the first, is unlikely because it is based on the idea that Soros did everything at the worst moment, while the first scenario suggests that he did everything with perfect timing.
Stock market regulations require managers of funds with more than $100 million in U.S. equities to file a document, known as a 13F, within 45 days of the end of the quarter, to disclose their holdings in stocks that trade on U.S. exchanges.
The value of Soros' U.S. equity portfolio decreased by almost 11% quarter-over-quarter to $6.5 billion. Soros Fund Management is a family office that manages public and private equity.
"SFM invests globally in a wide range of strategies and asset classes, including public equities, fixed income, commodities, foreign exchange, alternative assets and private equity," the firm says on its website.
Soros, whose net worth is estimated at $8.5 billion as of May 13, according to the Bloomberg Billionaires Index, is well known for pouring money into philanthropic efforts. Most of his firm's assets belong to Open Society Foundations, which supports "people across the world who work for justice, equity and free expression."
