Tesla Inc. (TSLA) – Get report Shares traded lower again on Friday, extending a move that has lost nearly $ 275 billion in value from the clean energy automaker brought on by rising interest rates and the ongoing correction in bitcoin.
Tesla shares have fallen nearly 30% since closing at an all-time high of $ 883.09 on Jan. 26, just a day before benchmark 10-year Treasury yields began their rise of 65. basis points amid accelerating inflation forecasts and better prospects for economic growth.
Tech stocks, particularly those with earnings expected to follow later, are remarkably sensitive to interest rate increases, as investor arithmetic assigns a lower “today” value to dollars earned in the future. .
Tesla, which has only posted a profitable year since its inception in 2011, is expected to increase its profits steadily for years to come as deliveries accelerate and production ramps up at new facilities in Texas and Germany, making its ‘current’ value is more dependent on interest rate movements than companies that are currently in the black.
Tesla shares fell 11.33% in Friday morning trading to change hands at $ 551.00 each, the lowest level since Dec. 2 and a move that would fix their market value soon. more than 560,000 million dollars. At its peak in early January, Tesla was trading with a market capitalization of around $ 834 billion.
ARK Innovation ETF (ARKK) – Get report Stocks, meanwhile, have turned negative for the year in part as a result of Tesla’s weakness. Cathie Wood, one of last year’s top fund managers and head of the $ 60 billion stablecoin, has been a longtime advocate for Tesla and Bitcoin, two of her fund’s key assets.
What was linked to a second vulnerability in Tesla shares that could be linked to its recent purchase of $ 1.5 billion in bitcoins, should be kept as an ‘intangible’ asset on its corporate balance sheet.
That means that, like the value of “goodwill,” it cannot be increased, but it can be reduced when bitcoin prices decline, leaving Tesla’s share price at least partially tied to bitcoin fluctuations.
Bitcoin prices have fallen nearly 20% since hitting an all-time high of $ 58,000 on February 21, partly as a result of rising bond yields that make US dollar holdings more attractive.
Short selling interest in Tesla also remains strong, with $ 32.16 billion, or 6.4% of the outstanding float at stake. Tesla shorts have risen $ 1.18 billion since last week, according to data from S3 Partners.
Betting against Tesla this year, in fact, has generated short sellers about $ 4.28 billion in market value gains, including $ 1.94 billion from yesterday’s near 5% drop.
Car market fundamentals aren’t working in Tesla’s favor either: Earlier this week, its China-based rival NIO NIO warned that sales of electric cars in the world’s largest market would slow for the first three. months of the year after a higher -Expected fourth-quarter loss.
Tesla sold 15,484 of its Chinese-made cars in January, the China Passenger Car Association (CPCA) said last month, up from 23,804 in December. Tesla’s sales in China were about a fifth of its overall total in 2020, when it delivered a record 499,550 vehicles, compared to just 12% in 2019.
CPCA will release February sales data on March 8.
One of the investors who is not concerned about the rate pressures of market fundamentals is billionaire Ron Baron, one of the first Tesla bulls to run Baron Capital Management.
Baron, who has 1.1 million Tesla shares in his personal account, cut Baron Capital’s exposure by about 1.7 million shares over the past six months at an average price of $ 666.70, but is still waiting. for stocks to go up to $ 2,000 in the next ten. years.
“When we started talking about Tesla in 2014, I said we would make at least 20 times our money and everyone was skeptical,” Baron told CNBC on Thursday. “It was unlikely, in the opinion of most people, that electric cars were going to dominate.”
“Now even General Motors GM expects to have an all-electric fleet by 2035, so it’s going in that direction and Tesla is the leader,” he added.