Back from the long weekend, Tesla is suffering an even longer Tuesday morning.
The electric vehicle company founded and run by Elon Musk saw its stock crash 15 percent in premarket trading on Tuesday, continuing a slide that began last week. Update: Tesla stock wound up falling 21 percent on Tuesday, the worst day in the company’s history as a publicly-traded entity.
Tech stocks were down significantly last week, with the electric vehicle company leading the way. It declined every day between Tuesday and Thursday, and while it closed up 2.78 percent on Friday, it dropped 7 percent in extended trading after the bell.
After eight months of unprecedented gains amid a massive decline in the broader economy that inducted its celebrity founder into the $100 billion net worth club, Tesla has hit the skids. So what happened?
While it doesn’t explain the entire sell-off, the most recent dip, during both Friday after-hours and Tuesday’s pre-trading period, can mostly be pegged to Tesla’s unexpected exclusion in the S&P 500. The company had been widely expected to join the prestigious Down Jones index, which wound up only adding Etsy, Teradyne and Catalent to the mix. That led to a dramatic fall on Friday that continued on Tuesday.
Dow Jones wouldn’t explain why Tesla didn’t make the cut, but it baffled many observers. Tesla’s value had risen 500 percent in 2020, powered by surprisingly strong sales and its growing battery business. The stock price had soared past $2000 several weeks ago before a 5-for-1 stock split took place last Monday that at first increased its value even more. It hit a high of $498 at that point, powered at least in part by Korean retail traders who were buying into the hype.
Now, the share price is hovering at just over $350.
Tesla revealed Tuesday that it had completed the $5 billion stock offering it began last week. So clearly, there’s a lot of hunger out there for the company’s stock. But it was considered an overheated stock by many analysts, who saw its growth as untenable. Long-term, the thought is that its battery business may be more lucrative than its niche car sales. Tesla is now down 30 percent in September, though, and analysts who were bearish on it are for the moment looking smart.
The company will look to rebound later this month with its Battery Day, which is meant to show-off its latest electric technology. And if the stock continues to fall, Musk can always command people to buy it again once he gets enough Neuralink chips in the heads of brokers and analysts.