Tesla stock fell 12.2% during yesterdays trading. This makes it one of the worst performing days for the stock. What is driving the sell-off?

Elon’s stake

Elon Musk, Tesla CEO, has been in all the headlines recently. On April 4th, Musk announced a 9.2% share in the company. Then, on April 18th, he proposed an acquisition of the whole company for a price of $54.20 per share.

This news got everyone talking, and some concerns were raised. Most importantly, how would Elon Musk be funding this purchase. The entrepreneur later came out to say he would be putting up $21B of his own money to make the purchase and was looking for other investors to join him in taking the company private.

This news has caused a sell-off for Tesla shares as investors come to the conclusion that Tesla shares will be used as collateral for Elon Musk. Those concerns are “causing a bear festival in the name,” Wedbush analyst Daniel Ives said. 

$275 billion

Since the initial news on April 4th, Tesla has lost $275B in market capitalisation. That’s a drop of 23%. Musk’s own wealth as seen a decrease of more than $40B in that time, nearly twice the proposed amount of cash he plans to put up. Yesterday’s sell off caused $126B on its own.

These circumstances couldn’t have come at a worse time for investors in the company. General growth stocks are selling and the S&P500 is down 7% in just four trading days.

Musk spreading himself thin?

Other factors that have led to the heavy sell-off are the concerns about Musk spreading himself too thin. How involved will Elon Musk be with Twitter while also trying to run his other companies: Tesla, SpaceX and The Boring Company.

Tesla has always returned strong results. Recently, they impressed with their Q1 2022 results. I do not personally think Elon Musk would take on a new role that would hinder his leadership in his other focuses. I expect to see continued performance from the company in terms of growth and expansion.

What now?

The Tesla stock price fell just below $900 yesterday. I think we will likely see some buying at this price until more information is shared by Musk.

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