: ‘Squashed like a bug’: Distressed-bond manager makes a multibillion-dollar options bet against Tesla

by | Aug 20, 2022 | Stock Market

Scott Burg, the chief investment officer of Deer Park Road Management Co., who made the prediction that Tesla would be “squashed like a bug” in a 2020 tweet, bought put options on almost 4.8 million Tesla shares during the second quarter, according to a regulatory filing this week, Bloomberg and Barron’s reported. The shares
covered by the puts had a face value of about $3.2 billion at the end of June, though the amount the firm has at risk may be far lower.

Burg reportedly told Barron’s the Tesla put-options position amounted to 0.1% of his portfolio. That isn’t all that much, and indicates Deer Park probably paid the less than $1 per share represented. After stepping up criticism of Tesla and CEO Elon Musk on social media this year, Burg deleted his Twitter account Wednesday. Deer Park didn’t return messages seeking comment, nor did Tesla, which has disbanded its media-relations department. Burg doesn’t consider himself a big Tesla bear. But he did tell Barron’s he’s bearish on the overall economy and the consumer. He expects Tesla’s stock to struggle, alongside other consumer-discretionary stocks, in the coming year. The Tesla wager is one of several bearish bets Deer Park made earlier this year using puts, which increase in value when an underlying asset declines. In the first quarter, Deer Park acquired puts on the S&P 500 index
with a face value of about $20 billion, more than four times the firm’s net assets of $4.6 billion at the end of March. STS Master, the firm’s flagship structured credit fund, reportedly gained 8.65% in the first half of 2022, with almost all of the gains coming from options, swaps and hedges, according to company documents obtained by Bloomberg. STS Master’s fortunes reversed sharply in July, when the fund tumbled roughly 6.5%, putting it on track for its worst quarter ever if results fail to improve by the end of September. The loss pared the fund’s 2022 gain to 2.2%, …

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