Why the Tesla share price crashed 21% on Tuesday
We examine some of the factors that have potentially contributed to the sell-off in the automaker's stock over the last week.
The Tesla share price collapsed a further 21% on Tuesday – as investor optimism around the automaker continues to wane.
The stock continued to fall in after-hours trade, dropping a further 1.84% to last trade at $324.15 per share. Over the last five sessions the Tesla share price has fallen by ~34%.
A myriad of factors potentially contributed to this recent sell-off, including:
- General market weakness, particularly in US tech stocks
- On-market share sales
- Tesla’s exclusion from the S&P 500
- Competition concerns
Tesla share price collapses, Nasdaq pulls back
US equity markets have faced heavy selling pressure over the last week – with the Dow Jones Industrial Average, S&P 500 and Nasdaq all falling in that period – in what many have described as a long overdue correction.
The tech-heavy Nasdaq 100 has experienced the brunt of this sell-down – retreating from its recently-made high of 12,439.48 points, to last trade at 11,068.26 points – representing a heady decline of approximately 11%.
Amid this broad market weakness, many US tech stocks – which had seen their share prices run up to stratospheric heights in recent times – have pulled back significantly.
Over the last five sessions Apple has seen its share price fall ~15%, Microsoft has plunged ~10%, Amazon has dove ~9%, and Tesla – the worst hit of those four amid this general market sell-off – has seen its share price crash a staggering 34%.
Despite this recent share price weakness, Tesla is up 283% YTD.
On-market share sales
Tesla’s recent $5.0 billion on-market share sales – announced in late-August – may have contributed to the recent share price weakness.
In a SEC filing released Tuesday, 8 September, Tesla said it had completed this on-market share sales on September 4, while noting that 'the final settlement of the shares sold is expected to be complete by September 9, 2020.'
S&P 500 exclusion
Beyond general market weakness and Tesla’s share sales, disappointment around Tesla’s snub from the S&P 500 looks to have potentially contributed to the bearish sentiment currently engulfing the company.
In an email exchange with MarketWatch, Daniel Ives, from Wedbush Securities, plainly said:
‘Tesla not getting into the S&P 500 club is a head scratcher and the stock will likely be down for the indexing implications.’
‘The Champagne was on ice to get into the S&P 500, [it] was baked into shares’ – also via market watch
Ives currently has a price target of $380 per share on Tesla, implying modest upside from current levels.
Competitive pressures soon to emerge for Tesla?
Elsewhere, a multi-billion dollar deal between electric vehicle maker Nikola and stalwart General Motors (GM).
Under the deal, it was revealed that General Motors would receive a $2 billion equity stake in the company, representing an 11% ownership of Nikola. In return, it was noted that GM would ‘engineer, validate, homologate and build the Nikola Badger for both the battery electric vehicle and fuel cell electric vehicle variants as part of the in-kind services.’
Nikola expects to make $5 billion in total cost savings as a result of this deal.
Bloomberg described this news as a ‘Match Made in Tesla Hell’, arguing that the GM-Nikola partnership produces ‘formidable competitor’ for Tesla.
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