Tesla rebounds after valuation dipped below $1 trillion

By Sruthi Shankar and Subrat Patnaik

(Reuters) -Tesla Inc’s stock bounced on Wednesday after a multi-day selloff endangered the electric-car maker’s position in the $1 trillion club.

Tesla rallied 4.3% to $1,067.95, closing higher for the first time since Chief Executive Elon Musk on Saturday polled Twitter users https://www.reuters.com/technology/musk-asks-followers-twitter-whether-he-should-sell-10-his-tesla-stock-2021-11-06 about selling 10% of his stake.

Earlier in the session, Tesla dropped as much as 3.5%, briefly pulling the company’s market value below the $1 trillion mark reached last month.

While Tesla has lost $153 billion in market value this week, retail investors have been net buyers of the stock. Some 58% of Tesla trade orders on Fidelity’s brokerage website on Wednesday have been for purchases, rather than sales.

Retail investors made net purchases of $157 million on Monday and Tuesday, according to Vanda Research.

Tesla is now up more than 51% in 2021, thanks largely to an October rally that was fueled by an agreement to sell 100,000 vehicles to rental car company Hertz.

“The company itself is on fire, with strong results,” said Tim Ghriskey, a senior portfolio strategist at New York-based investment management firm Ingalls and Snyder. “That is not going to fade quickly.”

Bullish sentiment returned to Tesla’s options on Wednesday, with about 1.1 calls traded for every put. Calls are typically used for bullish trades, while buying puts shows a bearish bias.

The company’s options accounted for about $109 billion in premium changing hands over the last two weeks, or about one in every three dollars traded in the U.S. listed options market, according to a Reuters analysis of Trade Alert data.

With the bulk of open Tesla call options set to expire this week and next, there is a “not negligible” risk that further options-driven selling will lead to a larger pullback for the stock, Vanda Research analysts wrote.

Also on Wednesday, Rivian Automotive Inc surged more than 29% in its Nasdaq debut, giving the Amazon.com Inc-backed electric vehicle maker a market valuation of nearly $93 billion and making it the second-most valuable U.S. automaker.

Wall Street’s biggest institutional investors are betting on Rivian to be the next big player in a sector dominated by Tesla amid mounting pressure on automakers in China and Europe to eliminate vehicle emissions.

Nearly 58% of respondents in Musk’s Twitter poll https://www.reuters.com/technology/musk-asks-followers-twitter-whether-he-should-sell-10-his-tesla-stock-2021-11-06 backed a sale of his shares, and he said he would accept either outcome. A 10% stake of Musk’s shareholdings was worth about $18 billion, as of Wednesday’s stock price.

Investors are keeping a close watch on Tesla filings with the U.S. Securities and Exchange Commission (SEC) for any clues on the share-sale plans. The SEC rules give companies four working days to report major events.

“Musk has to sell a large chunk of shares anyway if he wants to exercise a large set of soon-to-expire options, so the only question is whether or not clothing that anticipated sale as the result of a Twitter poll is actionable securities fraud,” said Howard Fischer, a New York-based partner at law firm Moses & Singer, where he specializes in white collar enforcement and investigations.

“Arguably, Musk has done the right thing by disclosing in advance his intent to sell,” he said.

Four former and current Tesla board members, including Musk’s brother Kimbal Musk, filed to sell nearly $1 billion worth of shares late last month, according to filings and market data.

“A CEO asking his followers if he should sell a large number of shares is never going to reflect well in the share price. Doing so a day after his brother has sold a large number just compounds investor fears,” said Craig Erlam, market analyst at Oanda.

“That said, we need to take Musk with a pinch of salt and investors may quickly view this as a dip buying opportunity.”

(Reporting by Sruthi Shankar and Subrat Patnaik in BengaluruAdditional reporting by Noel Randewich in Oakland, Calif.; Medha Singh and Bansari Mayur Kamdar in Bengaluru; Katanga Johnson in Washington, and Saqib Iqbal Ahmed and Ira Iosebashvili in New YorkEditing by Arun Koyyur and Matthew Lewis)

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