/Tesla stock tumbles toward second bear market this year

Tesla stock tumbles toward second bear market this year


Shares of Tesla Inc. tumbled Tuesday, putting them on track to kick off their second bear market this year, as investors rode a roller coaster the past week that started with a climb to a record close and was followed by a stock offering, a big bounce, and then an S&P 500 index snubbing.

The electric vehicle and battery maker’s stock
TSLA,
-16.65%

dropped 16.0% in midday trading Tuesday. It has lost 29.5% since closing at a record $498.32 a week ago, which is the day a 5-for-1 stock split took effect.

The stock’s selloff kicked off last Tuesday after the electric vehicle maker disclosed a $5 billion stock offering and a large shareholder reduced its stake. On Friday, the stock had plunged as much as 8.6% intraday, before pulling a sharp U-turn to close up 2.8%, to snap a 3-day losing streak, after the company disclosed stock trades by a number of insiders.

Read more: Elon Musk’s brother Kimbal made more than $8 million selling Tesla shares two days before he bought them.

Then after the close Friday, the stock took a big hit after S&P Dow Jones Indices shocked investors by not adding Tesla’s stock to its benchmark S&P 500 index
SPX,
-1.70%
,
as many on Wall Street believed was a foregone conclusion.

“Tesla not getting into the S&P 500 club is a head scratcher and the stock will likely be down for the indexing implications,” Wedbush analyst Dan Ives said in an email to MarketWatch.

Don’t miss: S&P 500 adds three companies not named Tesla — ‘a bit of a shocker,’ analyst says.

“With an estimated ~$4.5 [trillion] of assets indexed to the S&P 500, we think shares were reflecting expectations for substantial passive inflows,” Baird analyst Ben Kallo wrote in a research note. “Unclear why [Tesla] was not included in the recent rebalancing cycle, though we do think the stock will eventually be added to the S&P 500, having fulfilled all inclusion criteria.”

The shock snubbing is set to send the stock over the widely-watched 20% decline threshold.

Many on Wall Street label a decline on a closing basis of at least 10% to up to 20% from a record as a correction, and define bear market as a drop of at least 20%. Although those definitions are arbitrary and not necessarily considered a trading trigger, they are still often noted in trading lore, as they can be useful in recognizing volatility amid longer-term trends.

Despite this week’s tumble, the stock was still up more than fourfold (up 320%) year to date, while the Nasdaq Composite Index
COMP,
-2.41%

, of which Tesla is a member, has rallied 22.6% and the S&P 500 has gained 3.9%.

Tesla’s market cap is still $327.5 billion, compared with the market caps for S&P 500 components General Motors Co.
GM,
+10.23%

of $47.1 billion and Ford Motor Co.
F,
+3.40%

of $28.3 billion.

It took just two days for the stock to enter correction territory, as on Sept. 2 it closed 10.2% below its Aug. 31 record. Many would view a close on Tuesday at or below $398.65 as marking the beginning of a bear market.

Also read: Tesla’s stock sinks again to kick off a correction after disclosure of another large seller.

That last time Tesla’s stock entered a bear market was Feb. 27, 2020, when it closed at a split-adjusted $135.80 to be down 26.0% from its Feb. 19 record close (at the time) of $183.48. The stock went on to fall as much as 60.6%, as it bottomed at a three-month closing low of $72.24 on March 18.

The stock closed at a new record of $189.98 on June 8, or 70 trading days after it entered a bear market.


FactSet, MarketWatch

The bear market off a record high before that was launched on Nov. 2, 2017, when it closed at $59.85, or 22.3% below the previous record at the time of $77.00 on Sept. 18, 2017. After bouncing around for nearly two years, the stock finally bottomed on June 3, 2019, at a closing low of $35.79, or 53.5% below its September 2017 record.

The stock didn’t reach another record closing high until Dec. 18, 2019, or 534 trading sessions after the bear market kicked off.

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