Telsa shares plunge 21% in a day, Musk wealth down billions

September 9, 2020September 18, 2020 Iain Curry 1210 Views elon musk, share price, shares

Tesla’s share price has plunged 21 percent in a single day’s trading, the US$82billion ($114billion) loss in value the biggest the electric vehicle manufacturer has ever suffered.

From a previous close of US$418, its closing price on Tuesday was down to US$330. Bloomberg.com blamed the drop on Tesla not, as expected, being included in the S&P 500 Index.

The S&P is a stock market index the measures the stock performance of 500 large companies listed on stock exchanges in the Unites States. Becoming part of this major index would have seen it become a part of many hedge funds. Tesla’s lack of inclusion comes despite it being the world’s most valuable car maker in terms of market capitalisation (far larger than Toyota), and posting four consecutive quarterly profits.

The same day General Motors (GM) announced it was taking a US$2 billion ($2.8 billion) equity stake in Nikola Corp, hitting Tesla stock further. After much speculation, it was revealed GM would partner with Nikola to produce the Badger pick-up truck.

While Tesla shareholders will be reeling at this hit, long-term investors in the company will still be well ahead. In 2020 alone Tesla shares have increased by almost 300%, while in July it topped Toyota to become the world’s largest car-maker based on market value.

A single share in Tesla was over US$2000 last month, but the drop to US$330 isn’t from that lofty height due to a previous stock split.

Last month Tesla announced it would split its shares 5-1, a tactic to make individual shares more affordable to mum-and-dad investors.

With a single Tesla share before this costing over US$2000, the split meant each individual share was now closer to US$500. The split didn’t affect the value of investors’ holdings in Tesla, it just meant they accrued more shares in their portfolios.

And for those fascinated by the wealth accrued by the world’s richest, according to Bloomberg, Elon Musk’s wealth has dropped US$16.3 billion ($22.6 billion) due to the latest share price plunge. Ouch.

The big question is has Tesla’s bubble burst, and will investors start ditching stocks and plunge the share price further?

Iain Curry

A motoring writer and photographer for two decades, Iain started in print magazines in London as editor of Performance BMW and features writer for BMW Car, GT Porsche and 4Drive magazines. His love of motor sport and high performance petrol cars was rudely interrupted in 2011 when he was one of the first journalists to drive BMW's 1 Series ActiveE EV, and has been testing hybrids, PHEVs and EVs for Australian newspapers ever since. Based near Noosa in Queensland, his weekly newspaper articles cover new vehicle reviews and consumer advice, while his photography is regularly seen on the pages of glossy magazines.