Could Tesla Stock Go Down Again
Musk may be nigh to sell some Tesla stock. How would that affect markets?
When Elon Musk laid out the financing for his bid to buy Twitter, he promised to put up $21 billion in cash.
Even for Mr. Musk, who is worth well due north of $200 billion, that'southward a lot of greenbacks to come up with. Almost of his wealth is tied up in Tesla stock, and one of the nigh obvious means to heighten the money would be to sell some of those shares.
Given Tesla's enormous marketplace capitalization and its inclusion in major stock indexes, nigh everybody with a 401(k) probably owns some Tesla stock. The potential for Mr. Musk to sell some of his holdings, and spend less fourth dimension on Tesla as he shifts his focus to Twitter, has raised questions about the outlook for Tesla's share toll. The stock dived 12.2 percent on Tuesday, as the S&P 500 index fell two.eight percent.
Tesla's shares have lost virtually 20 pct of their value since Mr. Musk first revealed that he had bought a big stake in Twitter, kicking off takeover speculation. Jim Cramer, the frenetic host of CNBC's "Mad Money," defendant Tesla of "hurting this market pretty badly."
Has Musk sold off stock to fund his Twitter bid?
It'south too early to know. Such sales would have to be reported to the Securities and Exchange Commission, but those reports are not instantaneous. Sales tin can take a few days to exist made public.
What impact would sales by Musk have on Tesla's share price?
Fifty-fifty a auction of a huge portion of Mr. Musk's Tesla stock would be unlikely to impact Tesla's share cost for also long.
Mr. Musk is Tesla's biggest shareholder, holding about 17 percent of the company'southward shares — about 175 million shares in total.
He would need to sell virtually 24 one thousand thousand shares at Tuesday'southward price to generate $21 billion in cash. That's about an boilerplate day's trading volume for Tesla stock — a lot, only not enough to overwhelm the market. On Tuesday, about 45 meg shares were bought and sold.
Mr. Musk's financing package for Twitter likewise includes $12.5 billion in loans using his Tesla shares every bit collateral. If Tesla's stock falls far plenty, lenders would require Mr. Musk to add together collateral to back up the loans, potentially forcing him to sell more stock to come up upwards with the cash.
Mr. Musk has sold off large tranches of Tesla'southward stock before. Last yr, he sold some xv meg shares, worth more than than $16 billion, over two months. Those sales did non appear to measurably drive Tesla'southward toll down, though it'southward unknowable whether the price would have gone upward had he not been selling.
When Tesla'south stock drops, what happens to the rest of the market?
Tesla is a component in both the S&P 500 and the Nasdaq composite index. In addition to beingness barometers of how stocks in the United States are performing, both indexes are mirrored by numerous mutual funds that are invested in widely.
The S&P 500, considered the criterion U.S. alphabetize, weights companies according to their market value. Tesla, which is worth virtually $900 billion, is 1 of the most influential stocks in the alphabetize.
For every dollar that Tesla'south stock dropped on Tuesday, the S&P 500 lost 0.099 points, according to Howard Silverblatt, a senior index analyst at Southward&P Dow Jones Indices. That means the drib in Tesla's stock accounted for nearly a tenth of the S&P 500's fall on Tuesday.
"So it did have a very big impact," Mr. Silverblatt said, but "not the highest." Apple, with nearly three times the valuation of Tesla, has far more touch on. Its stock'due south drop of 3.7 percent on Tuesday contributed more than to the overall alphabetize's pass up.
And then why did Tesla's stock fall?
Tesla is a famously volatile stock. Tuesday's 12.2 percent fall was its worst daily decline since Sept. 8, 2020, when it shed about 21 percent of its value. Merely in the past half dozen months, Tesla shares have twice fallen nearly 12 percentage, on Nov. nine and Jan. 27.
Some — including Mr. Musk, at times — accept suggested that Tesla is overvalued. Among those who believe in Tesla's valuation, which is much college than rival automakers' relative to the size of its operations, a lot of the argument depends on Mr. Musk's stewardship. Even Tesla acknowledges this, stating as a risk in its most recent quarterly study: "We are highly dependent on the services of Elon Musk, techno-king of Tesla and our chief executive officer. Although Mr. Musk spends meaning time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla."
A lot almost Mr. Musk'southward programme to buy Twitter is unknown, including how involved he would be. "Tesla investors are worried that Musk might spend too much fourth dimension trying to fix the social media behemothic's issues and that will accept away his laserlike focus" on Tesla, said Edward Moya, a senior market annotator at OANDA.
Or equally Mr. Silverblatt put it: "It's anticipation of something that hasn't occurred yet. It will be a while before we know anything."
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Source: https://www.nytimes.com/2022/04/27/technology/tesla-stock-price-musk.html
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