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Tesla Stock Is on an Accelerated Value Descent, Shows No Signs of Recovery

Tesla has the highest market cap among car companies and was probably the first one to reach $1 trillion in value. It is certainly the first to lose $700 billion of market cap in approximately one year, which makes it impressive that it is still worth more than Toyota and Volkswagen. Bloomberg tried to explain why that happened and cited a few reasons.
Tesla share prices are losing value in an accelerated pace 6 photos
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The main one would be Twitter. Elon Musk would be too distracted trying to run the tech company and not giving his automaker the attention it needs. However, Twitter contributed to more than that. Musk had to sell 19.5 million shares to raise $3.95 billion to complete the transaction. That massive sale alone was enough to alarm smaller investors, who may have decided it was time to get rid of the stock before Musk sold even more.

Another factor for the steep drop would be the lower demand for Tesla vehicles. Bloomberg mentions that Jeffrey Osborne – a Cowen analyst – said China is buying fewer EVs from the American EV maker. What the media outlet did not mention is that this happened in a market in which BYD is growing at an incredible speed. In other words, Tesla’s low results have nothing to do with market conditions: they are intrinsic to the automaker. Most of Giga Shanghai’s production has to be exported. That situation led the company to reduce prices in China to try to reverse the bad sales performance.

When Tesla slashed its prices in October, Huxiu News had anticipated the move, which Tesla denied. The price reduction happened anyway. The Chinese outlet had also predicted the first price reduction, and it said that the company would cut its prices for the third time. Tesla is denying once again that it will happen. Whether Tesla is correct or not this time, the fact is that the last price slash made the Model Y eligible for the Chinese EV incentive. Not even that did the trick in improving its sales in China.

According to Bloomberg, “hedge funds are moving to a negative bias on the stock.” That may lead more people to sell Tesla’s shares, making its market cap drop even more. For a company that sells just a fraction of what the world’s largest carmakers do every year, that may be just a natural adjustment. The hard part will be explaining that to everyone who thought they would get rich with Tesla stock.

They are currently begging Elon Musk to order a buyback of Tesla shares, keeping prices at least at the current levels. With Tesla under investigation by several federal entities, such as the Department of Justice (DoJ) and the Securities and Exchange Commission (SEC), that would be a very unlikely move.

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Editor's note: The gallery contains images of Elon Musk.

About the author: Gustavo Henrique Ruffo
Gustavo Henrique Ruffo profile photo

Motoring writer since 1998, Gustavo wants to write relevant stories about cars and their shift to a sustainable future.
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