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.

Open an IG demo account to practice trading stocks like Tesla and Apple today.

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.

How to trade Tesla – long or short

What do you make of Tesla’s recent share price weakness: are you bullish or bearish on the company’s long-term prospects? Whatever your view, you can use CFDs to trade both rising and falling markets, including Tesla and other auto stocks – through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Tesla using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Tesla' in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.