Tesla selloff puts at risk its $1 trillion club membership

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(Businesshala) – Tesla Inc shares were set to open lower for a fourth session on Wednesday, earning $1 trillion after top boss Elon Musk voted to sell 10% of his stake to Twitter users. jeopardized the electric-car maker’s position in the club.

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

The company has lost nearly $200 billion in market value since Monday after Musk’s survey and its shares were down 1.8% at $1,005.10 before the bell in volatile trading.

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Stocks are down 16.3% so far this week and if they fall below $995.75, Tesla’s market capitalization will slip below the $1 trillion mark.

The world’s most valuable carmaker entered the elite trillion-dollar club last month, securing its largest order for 100,000 Tesla vehicles from rental car company Hertz.

Musk’s poll over the weekend sparked a sell-off after his Twitter followers asked if he should sell his 10% stake in Tesla. About 58% of them supported the sale.

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.

Analysts at research firm Wanda Research warned that there could be a major pullback depending on call option activity in the stock.

Call options allow an investor to bet on gains in the share price without essentially owning the underlying stock. Both retail and institutional investors have loaded up on Tesla call options, with open interest focused on the November 12 and November 19 expirations, he said.

Insiders sold nearly $1 billion in stock

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.”

Despite the sell-off, the stock is still up about 45% for the year, after hitting a series of record highs in an eye-watering rally that propelled the company into the trillion-dollar club.

Reporting by Shruti Shankar and Subrata Patnaik, additional reporting by Medha Singh and Bansari Mayur Kamdar in Bengaluru; Editing by Anil D’Silva and Arun Koyur

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