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Tesla Faces Record Bearish Sentiment Amid Musk-Trump Feud
Tesla Inc. (NASDAQ: TSLA) is currently navigating turbulent waters as a public feud between CEO Elon Musk and President Donald Trump intensifies. The dispute has not only captured headlines but has also significantly impacted Tesla's stock performance and investor sentiment.
As of June 6, 2025, Tesla's stock price stands at $284.70, reflecting a substantial decline of 14.3% from the previous day. Escalation of the Musk-Trump Dispute
The conflict began when Musk publicly criticized a Republican-backed budget bill, labeling it a "disgusting abomination." In response, President Trump threatened to revoke government contracts with Musk's companies, including Tesla and SpaceX.
This exchange led to a significant market reaction, with Tesla's market capitalization dropping by approximately $152.3 billion in a single day—the largest one-day loss in the company's history.
Surge in Bearish Options Trading
Investor concerns have translated into a record surge in bearish options trading. On June 5, 2025, approximately 4.01 million put contracts were traded, surpassing the previous record from late 2022 and marking more than four times the 20-day average.
This spike indicates a significant shift in investor sentiment, with many anticipating further declines in Tesla's stock price amid the ongoing political tensions and potential policy changes affecting the electric vehicle industry.
Impact on Tesla's Business and Outlook
The feud's implications extend beyond stock performance. Analysts express concerns that the loss of government support, such as EV tax credits, could further hinder Tesla's growth prospects. Piper Sandler’s Danny Kirsch noted that the transition from government support to potential opposition could significantly affect Tesla's valuation.
Additionally, Tesla faces challenges in key markets, with weakening sales and increased competition from rivals like China's BYD.
Short Sellers Capitalize on the Decline
The stock's downturn has provided substantial gains for short sellers. On June 5, 2025, traders profited approximately $4 billion from short positions in Tesla shares, marking one of their most profitable single days ever.
Year-to-date, short sellers have accumulated $7 billion in profits, representing a 30% return, with Tesla remaining the second most shorted stock in the U.S. by total position value.
Potential for Reconciliation
Despite the tensions, there are indications that the feud may be cooling. Reports suggest that White House officials have arranged a call with Musk to defuse tensions, leading to a rebound in Tesla's stock, which rose over 4% in premarket trading on June 6, 2025.
However, financial experts caution that the damage to Musk’s reputation and Tesla’s shareholder value may be lasting, with potential legal consequences and ongoing volatility in the stock's performance.
