‘Crushed like a bug’: Distressed-bonds manager stakes a multi-billion dollar option against Tesla

Scott Berg, chief investment officer of Deer Park Road Management Co., who predicted Tesla would “crushed like a bug” In a 2020 tweet, Bloomberg and Barron’s reported buying put options on nearly 4.8 million Tesla shares during the second quarter, according to a regulatory filing this week.

The shares covered by the put had a face value of about $3.2 billion at the end of June, although the amount of risk on the firm may have been much smaller.

Deer Park’s chief investment officer Scott Berg pointed out that Barron’s Tesla put-options position accounts for 0.1% of his portfolio. That’s not all, and indicates that Deer Park probably paid less than the $1 per share that the put represents.

After criticizing Tesla and CEO Elon Musk on social media this year, Berg removed his twitter account Wednesday.

Dear Park did not return messages seeking comment, nor did Tesla, which has dissolved its media relations department. Berg doesn’t consider himself a big Tesla bear. But he told Barron that he was in a recession on the overall economy and the consumer. He expects Tesla stock to struggle, but like any other consumer discretionary stock, this coming year.

The Tesla bet is one of several bearish bets made earlier this year using puts, which increase in value when an underlying asset declines. In the first quarter, Deer Park acquired on the S&P 500 index with a face value of about $20 billion, more than four times the firm’s net worth of $4.6 billion at the end of March.

According to company documents obtained by Bloomberg, STS Master, the firm’s flagship structured credit fund, gained 8.65% in the first half of 2022, with almost all gains coming from options, swaps and hedges.

STS Master’s fortunes reversed sharply in July, when the fund plunged nearly 6.5%, putting it on track for its worst quarter ever if results didn’t improve by the end of September. After Bloomberg reported on the short bet, the loss pushed the fund’s 2022 profit to 2.2%, the firm told clients in an email on Friday.

Shares of Austin, Texas-based Tesla fell 38% in the second quarter amid growing concerns about production disruptions at the electric-automaker’s factory in Shanghai. The stock has rebounded sharply since June 30, gaining 35% during Thursday’s close.

Tesla Inc. TSLA shares,
With the NASDAQ Composite Index comp, the stock slipped to $890.00 on Friday, in what proved to be a disappointing trading session for the market,
fell 2% at 12,705.22 and the Dow Jones Industrial Average ended at the DJIA,
fell 0.86% to 33,706.74. On Friday, Tesla suffered its fourth consecutive loss. Tesla Inc. closed at $353.49 from its 52-week high of $1,243.49, which the company reached on Nov.

Deer Park primarily focuses on distressed securities, including mortgage-backed and corporate debt, though it also has exemptions to invest in stocks and equity derivatives, according to a filing.

Little known outside Wall Street, Deer Park has earned an average annual return of about 19% since founder Michael Craig-Schakman, one of the first employees of Easy Englander’s Millennium Management, hired STS during the 2008 financial crisis. Master started.

Twitter Inc. TWTR,
Deer Park itself could be a catalyst for loading up Tesla put options in the second quarter.

In April, Musk made an unsolicited bid to acquire the social media platform for $44 billion, only to try to walk out of the deal after tech stocks were crushed in the market. The two sides are now engaged in a court battle that has weighed on Tesla shares, as Musk sold billions of dollars of his personal stake in case Musk was forced to close the deal.

“Do you know what the circle of death is? Coming…$TSLAQ,” Berg tweeted On May 20, Tesla shares fell 6.4% when trading under the ticker TSLA. Stock exchanges usually add the letter Q to a company’s ticker when it files for bankruptcy protection.

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