LONDON (Reuters) – Tesla shares were set to fall in the red for the year on Tuesday, hit by a broad sell-off of high-flying tech stocks and the crash of bitcoin, in which the electric car maker recently invested 1,500. millions of dollars.
At 1121 GMT, Tesla was down more than 6% in premarket deals in the US after a 8.5% drop during the previous session.
The Elon Musk-led firm has had a stellar journey since 2020, starting at around $ 85 a share, before hitting the $ 900 mark on January 25.
Currently trading at around $ 673 in pre-market trading, the stock is down 25% from its peak, which is above the 20% level that technically defines a bear market.
Bitcoin has also entered a bear market, dropping from a high of $ 58,354 on February 21 to a low of $ 45,000 on Tuesday.
A Germany-based trader said he was “pulling chips off the table” from Tesla, as his $ 1.5 billion investment in the cryptocurrency could “backfire now.”
Among the factors contributing to the increase in stocks is the growing retail and institutional demand for “environment, social and governance” (ESG) friendly investments.
“There are many reasons, purely from a sustainability angle, to keep Tesla, it is part of that transformation towards a more sustainable business model,” Valentijn van Nieuwenhuijzen, chief investment officer at asset manager NN IP, told Reuters.
However, he added that Elon Musk’s decision to invest in bitcoin could weigh on Tesla’s ESG rating.
The billionaire has come under fire for praising Bitcoin ahead of Tesla’s purchase of the cryptocurrency.
His role in fueling a retail frenzy in the shares of American video game chain GameStop and in raising the price of the meme-based digital currency dogecoin has also come under fire and has been acclaimed by a large fan base.
Analysts at Barclays noted that there was a drop in conversations about electric car makers on Reddit’s WallStreetBets forum, which could explain some of the loss of appetite for stocks.
“With only 2-3 presentations in total each of the last few days, we remain below the trend in attention that has come along with the big jumps in returns in the past,” analysts said in a note.
Other analysts also cautioned against investing in stocks, which remain one of the most expensive in the S&P 500 index at 163 times its 12-month future earnings.
While investing in bets against the company’s stock has had a spectacular counterproductive effect in the past, the short interest in Tesla shares remained at 5.5%, according to data from Refinitiv.
Chart: Tesla Stock Liquidation After Multiple Gains –
Reporting by Julien Ponthus, Thyagaraju Adinarayan and Karin Strohecker; edited by David Evans