Tesla (NASDAQ:TSLA) short hedge-fund managers Adam Capital has surrendered their bear position due to the electric car maker's strong Q3 earnings results. The Brazilian hedge-fund is the latest burn victim in Elon Musk's short burn of the century, which he predicted back in May 2018. 

Adam Capital announced their bearish defeat via a monthly letter to clients, reported Bloomberg. The firm decided to end its short position because the Elon Musk-led company was operating more efficiently, challenging the hedge fund's investment thesis.

Since Tesla's Q3 earnings results were released, TSLA shorts have garnered $1.36 billion in mark-to-market losses, said Ihor Dusaniwsky from S3 Partners to Bloomberg. TSLA shorts had made more than $2 billion in mark-to-market gains before Q3, and lost almost 70 percent of it after Tesla's third-quarter results were released. 

Elon Musk predicted this outcome in a May 2018 tweet, when he warned shorts that the burn of the century would be coming. As always, though, Musk was a little delayed on his delivery, but the long wait may have been satisfying for TSLA bulls. 

As longtime TSLA Bull Ron Baron said: "[Elon Musk] always delivers. He doesn't deliver on time. He always delivers, just not on time, so far."

Looks like sooner than expected. The sheer magnitude of short carnage will be unreal. If you’re short, I suggest tiptoeing quietly to the exit … https://t.co/A0Q90pSLKA

— Elon Musk (@elonmusk) May 5, 2018

Since the Q3 earnings call, the most resilient of bears have tried to generate the narrative that Tesla's current gross margins are not sustainable. However, TSLA bulls have pushed back, arguing Tesla's growing efficiency will only help the company's gross margins increase over time. 

Adam Capital seems to have gained a bullish perspective on the matter based on the fact that it cited Tesla's efficiency as the reason for ending its short position. ARK Invest analysts Sam Korus and Tasha Keeney, as well as the company's CEO and Founder, Cathie Wood, explained how Tesla's growing efficiency bodes well for the company's future through Wright's Law. 

The law reveals a correlation between efficiency and a decrease in the price of production. Using Wright's Law, Korus and Keeney confidently predicted a 30 percent gross margin for Tesla by the end of 2020 for the Model 3. 

A significant turning point for Tesla was the GA4 at Fremont, which established an efficient assembly line for the company. Gigafactory 3 in China seems to be adopting the GA4's format and may prove to be Tesla's most efficient factory to date. With that in mind, the shorts may want to buy some salve for yet another incoming burn this fourth quarter.