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Tesla’s Stock Has Dropped 18% Over the Past Three Days

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Key Points

  • Tesla shares are now officially in the correction zone, in a week when the electric-vehicle manufacturer announced a share sale that could dilute its valuation and a top investor cut its stake almost in half.
  • The company’s stock closed down 9 percent on Thursday, taking the fall since Monday’s close to nearly over 18 percent, the steepest 3-day decline since mid-March.
  • The Elon Musk-led company was a top performer in this year’s U.S. stock market, growing by almost 500 percent through Monday. Solid second-quarter results supported the rise, which also fueled talk about Tesla being a part of the S&P 500 Index.
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Tesla shares are now officially in the correction zone, in a week when the electric-vehicle manufacturer announced a share sale that could dilute its valuation and a top investor cut its stake almost in half.

The company’s stock closed down 9 percent on Thursday, taking the fall since Monday’s close to nearly over 18 percent, the steepest 3-day decline since mid-March. The decline came in the midst of a wider downturn in high-flying tech stocks that led the Nasdaq 100 to its worst one-day loss since March.

The Elon Musk-led company was a top performer in this year’s U.S. stock market, growing by almost 500 percent through Monday. Solid second-quarter results supported the rise, which also fueled talk about Tesla being a part of the S&P 500 Index. His hyped “Battery Day” event, which will take place later this month, may have also sparked excitement as many expect the company to announce new innovations that day.

All of these developments, along with the cult-like following of Musk, have made Tesla a favorite of retail investors, with it occupying almost a permanent place in online brokerage Robinhood’s list of most popular stocks.

While the explanation is hard to find for this week’s pause to Tesla’s previously relentless rally, some say it’s the law of gravity catching up, probably helped by reports of the company’s largest shareholder after Musk reduced its stake, as well as the market slowly digesting Tesla’s plan to sell as much as $5 billion in stock. The share sale was revealed on Tuesday, and if it sells at least $2.34 billion under the plan it will be the biggest equity haul ever for the firm.

Whatever the cause, the stock plummeted in New York as much as 10 percent, down about 19 percent from the $498.32 closing high it reached on August 31. A stock is deemed to be correcting if it falls from the latest peak by more than 10 percent, while a 20 percent decline will place it on a bear market.

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