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: 'Squashed like a worm': Troubled bond manager makes billion-dollar options bet on Tesla

Deer Park Road Management Co.’s chief investment officer Scott Burg predicted in a 2020 tweet that Tesla would be “squeezed like a worm,” he said the following year Put options on nearly 4.8 million Tesla shares were bought, Bloomberg and Barron’s reported, according to regulatory filings this week. The face value at the end of June was about $3.2 billion, although the amount at risk for the company is likely to be much lower.

Berger reportedly told Barron’s that his Tesla put options position was 0.1% of his portfolio. That’s not much, suggesting that Deer Park could be paying less than $1 per share.

Berg deleted his Twitter account on Wednesday after ramping up his criticism of Tesla and CEO Elon Musk on social media this year.

Deer Park did not respond to a message seeking comment, nor did Tesla, which has disbanded its media relations unit. Burg doesn’t consider himself a big Tesla bear. But he did tell Barron’s that he was pessimistic about the overall economy and consumers. He expects Tesla’s stock to struggle like other consumer discretionary stocks over the coming year.

The Tesla bet is one of several that Deer Park made earlier this year using put options that increase in value when the underlying asset falls. In the first quarter, Luyuan acquired S&P 500 SPX put options, -1.29%, with a face value of about $20 billion, more than four times the company’s market value as of the end of March , with a net worth of $4.6 billion.

The firm’s flagship structured credit fund, STS Master, reportedly gained 8.65% in the first half of 2022, with nearly all of its gains coming from options, swaps and hedging, according to the firm obtained by Bloomberg document.

STS Master’s fortunes reversed sharply in July, when the fund fell about 6.5%, and if the performance fails, the fund is set for its worst quarter ever to improve before the end of September. The loss reduces the fund’s 2022 gain to 2.2%, the firm told clients in an email Friday after Bloomberg reported on the short bet.

Shares of Austin, Texas-based Tesla grew in the second quarter amid growing concerns about production disruptions at the electric car maker’s Shanghai plant. The stock has rebounded sharply since June 30, surging 35% by Thursday’s close.

Tesla shares fell to $890 on Friday in what proved to be a dismal session on Nasdaq COMP, – 2.01% down 2% to end at 12,705.22, Dow Jones Industrial Average and Dow Jones Industrial Average )-0.86% down 0.86 % to 33,706.74. Friday was Tesla’s fourth straight day of losses. Tesla closed $353.49 below its Nov. 4 52-week high of $1,243.49. There is scope for investing in stocks and equity derivatives, a filing shows.

Little known outside Wall Street, Deer Park has averaged about 19% annual returns since founder Michael Craig-Scheckman. Izzy Englander’s first employees at Millennium Management founded STS Master during the 2008 financial crisis.

Twitter Inc. TWTR, +0.30% Likely Deer Park Loads Tesla Puts in Q2 catalyst.

In April, Musk made an unsolicited $44 billion bid for the social media platform, only to try to back out of the deal when the market rout crushed tech stocks. The two sides are now engaged in a lawsuit that has weighed on Tesla’s stock price, in part because Musk sold billions of dollars worth of personal stakes in case he was forced to close the deal.

“You know what a death spiral is? Here comes… $TSLAQ,” Berg tweeted on May 20, when Tesla’s stock fell 6.4%. When a company files for bankruptcy, stock exchanges usually add the letter “Q” to the company’s ticker symbol.



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