Exactly how Daimler is hedging its investment in Tesla Motors is not being revealed, but since the electric vehicle company's stock has been roller-coasting all around the place this year, we're not too surprised that some sort of stabilization methods have been put in place. The TSLA stock went on a big drop from its $193 high (all the way down to $121.58, but has since begun climbing again to around $144) since news of independent and isolated fires in Tesla Model S EVs were reported earlier this year. The ups and downs were enough for Daimler to hedge its holding in Tesla and set up a calmer partnership as the two companies move forward together.

Daimler said in a statement that, "The objective of the transaction concluded is to protect the value of Daimler's shareholding in Tesla, whilst allowing Daimler to retain significant participation in any further appreciation of Tesla share price during the three year collar agreement." Daimler owns 4.3 percent of Tesla. Currently, the public information is that Tesla supplies components (motors and batteries) for the Smart Fortwo ED and the Mercedes-Benz B-Class EV that is coming next year. Seeking Alpha says B-Class EV sales will be "relatively light in the US."

As stated, we're not sure how Daimler is hedging its investment, but one definition of hedging is to "mak[e] an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract."

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