Topline
Shares of Tesla, one of the past year’s best-performing stocks, continued to rack up massive losses Tuesday after Chief Executive Elon Musk over the weekend sparked concerns that he would sell 10% of his stake in the electric car maker, casting doubts on the long-term viability of the stock’s meteoric gains.
Despite plunging 12% since Friday’s close, Tesla shares are still up a staggering 160% over the past … [+]
Key Facts
After falling nearly 5% on Monday, shares of Tesla plummeted another 12% Tuesday to $1,023.50, pushing the firm’s market capitalization down by about $140 billion and marking the stock’s worst one-day drop since falling 21% on Sept. 8, 2020.
Fueling concerns on Tuesday, storied hedge fund investor Michael Burry, who famously predicted the housing bubble that sparked the Great Recession, emerged from a Twitter hiatus to say Musk “NEEDS to sell” to help personal service loans he’s taken using Tesla shares as collateral.
Though Musk remains the richest person in the world, his fortune tanked by about $33.7 billion Tuesday, falling to $271 billion and racking up two-day losses of nearly $50 billion.
Triggering the two-day stock decline, Musk on Saturday called on Twitter users to help decide whether he should sell 10% of his roughly 23% stake in Tesla in response to a short-lived proposal in Congress that would have taxed billionaires’ unrealized stock gains to help curb tax avoidance among the ultrawealthy.
Despite the selloff, analysts at both Wedbush and Jefferies increased their Tesla price targets on Monday to $1,800 and $1,400, respectively, with Wedbush’s Dan Ives saying the stock could soar as much as 65% over the next year thanks to better-than-expected profit margins unveiled in the third quarter.
But other analysts aren’t so sure: Tesla stock holds an average price target of $810 based out of 35 firms issuing such guidance, according to Bloomberg, representing about 25% downside to Tuesday’s closing price.
Big Number
$1 trillion. That’s Tesla’s market value after the two-day plunge. Shares have slipped nearly 17% from an all-time high on Thursday, but are still up 150% over the past year, compared to 32% for the S&P 500.
Key Background
Musk’s weekend tweets sparked investor concerns that Tesla’s stock could struggle to hold on to its recent gains amid a massive liquidation after the poll closed with nearly 58% of the more than 3.5 million respondents voting in support of the proposal. Musk, who pledged in a separate tweet to “abide by the results of [the] poll,” owns about 23% of Tesla’s total shares. On Monday, Ives said investors should not be “overly concerned about” the possible transaction because it was already expected that Musk would sell about 6% of his stake to help pay a big tax bill coming due from stock options set to expire next August. In a note, Oanda analyst Ed Moya also chalked up Musk’s motivations to the impending tax bill.
Crucial Quote
“We would rather Musk rip the Band-Aid off now and sell this portion of stock rather than it lingering over the next year and feeding into any bear thesis,” Ives said Monday.
Tangent
Since Tesla went public on the Nasdaq exchange in 2010, Musk has only sold stock twice. In July 2010, Musk sold slightly more than 1.4 million shares for $24 million, and in 2016, he sold another 2.7 million shares for about $593 million.
Further Reading
Elon Musk’s Fortune Plunges By Nearly $29 Billion Tuesday As Tesla Shares Slide (Forbes)
Here’s How Much Elon Musk Would Pay In Taxes If He Sells 10% Of His Tesla Stock (Forbes)
Elon Musk’s Twitter Followers Vote For Him To Sell 10% Of Tesla Stock (Forbes)
Elon Musk Says He’ll Sell 10% Of His Tesla Stock If Twitter Users Vote For Him To (Forbes)
