Tesla rebounds after valuation dipped below $1 trillion

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(Businesshala) – Tesla Inc stock on Wednesday jeopardized the electric-carmaker’s position in the $1 trillion club after a multi-day selloff.

FILE PHOTO: Tesla Inc. CEO Elon Musk walks next to a screen showing an image of a Tesla Model 3 car during the opening ceremony of the Tesla China-made Model Y event in Shanghai, China January 7, 2020. Businesshala / Ellie Song / FILE PHOTO

Tesla rallied 4.3% to $1,067.95, closing higher for the first time since Chief Executive Elon Musk told Twitter users on Saturday about the sale of his 10% stake.

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Earlier in the session, Tesla fell as much as 3.5%, briefly dragging the company’s market cap below the $1 trillion it reached last month.

While Tesla has lost $153 billion in market value this week, retail investors have been net buyers of the stock. Some 58% of Tesla’s trade orders on Fidelity’s brokerage website on Wednesday were for buy rather than sell.

Retail investors netted $157 million on Monday and Tuesday, according to Wanda Research.

Tesla is now up more than 51% in 2021, thanks in large part to an October rally that was driven by an agreement to sell 100,000 vehicles to rental car company Hertz.

“The company itself is under fire, with strong results,” said Tim Grisky, a senior portfolio strategist at New York-based investment management firm Ingalls & Snyder. “It’s not going to fade away anytime soon.”

Bullish sentiment returned to Tesla’s options on Wednesday, with calls trading around 1.1 for each put. Calls are typically used for bullish trades, whereas buying puts show a bearish bias.

According to a Businesshala analysis of Trade Alert data, the company’s options have accounted for approximately $109 billion in premium changing hands over the past two weeks, or one out of every three dollars traded on the US listed options market.

With open Tesla call options expiring this week and next week, there is a “not negligible” risk that further options-driven sales will result in a major pullback for the stock, Wanda Research analysts wrote.

Also on Wednesday, Rivian Automotive Inc. rose more than 29% on its Nasdaq debut, giving the Amazon.com Inc-backed electric vehicle maker a market valuation of nearly $93 billion and making it the second most valuable US automaker .

Wall Street’s biggest institutional investors are betting on Rivian to become the next big player in the Tesla-dominated sector amid mounting pressure on automakers in China and Europe to eliminate vehicle emissions.

About 58% of respondents to Musk’s Twitter poll supported the sale of their shares, and said he would accept any outcome. As of Wednesday’s stock price, 10% of Musk’s shareholding was worth about $18 billion.

Investors are keeping a close eye on Tesla filings with the US Securities and Exchange Commission (SEC) for any clues on the share-sale plans. SEC rules give companies four business days to report major incidents.

“Musk has to sell a substantial portion of the shares anyway if he wants to exercise a larger set of soon-expiring options, so the only question is whether the expected sale of Clothing will result in a Twitter poll as an actionable security.” Whether it’s fraud or not, said Howard Fisher, a New York-based partner at the law firm Moses & Singer, where he specializes in white-collar enforcement and investigation.

“Arguably, Musk did the right thing by disclosing in advance his intention to sell,” he said.

Four former and current Tesla board members, including Musk’s brother Kimbal Musk, filed to sell shares worth nearly $1 billion late last month, according to filings and market data.

“A CEO asking his followers whether he should sell a large number of shares is never going to be well reflected in the share price. Selling a large number by his brother,” said Craig Erlam, market analyst at Oanda. Doing so after a day only adds to the fear of investors.”

“That said, we need to take Musk with a pinch of salt and investors may quickly see this as an opportunity to take the plunge.”

Reporting by Shruti Shankar and Subrata Patnaik in Bengaluru Additional reporting by Noel Randevich in Oakland, Calif.; Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Katanga Johnson, and Saqib Iqbal Ahmed in Washington and Ira Iosbashvili, Arun Koyur and Matthew Lewis in New York


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