Tesla loses 2 years of gains amid Elon Musk's Twitter saga, demand fears

The stock closed down 7.2% at $177.59 in New York on Wednesday, dropping to its lowest since November 2020.

Tesla investors had remained suspicious that Musk would unload more shares in the carmaker, despite his denials. Those fears were confirmed Tuesday in a regulatory filing that disclosed the sale of shares worth $3.95 billion, bringing his total proceeds over the past year to about $36 billion. He still owns about 14%, according to Bloomberg data.

“Musk selling stock again after saying he wouldn’t can only leave the door open to more going forward," said Mark Taylor, a sales trader at Mirabaud Securities.

Still, investors in Tesla have had to contend with far more than just the CEO’s mercurial takeover of the social-media platform Twitter. The EV maker has struggled with supply-chain shortages and rising raw material costs along with the rest of the global automotive industry, with new concerns emerging about demand for its vehicles taking a hit as inflation-stung consumers tighten their purse strings.

The stock has also been swept up in the broader trend of investors exiting pricey growth stocks in favor of more stable companies as an economic recession looms large.

Tesla’s share price has declined for three straight months and November is proving even worse, with the stock falling 22% so far. Its Relative Strength Index is back in oversold territory, and the stock has lost over $674 billion in market capitalization since peaking last November.

Tesla Loses Valuation Race to Berkshire as Growth Stocks Sputter

Tesla analysts warned that while the latest stake sale by Musk can bring some temporary relief for the EV maker’s investors, the company still has plenty of challenges that can hold back the shares.

While overhang from the share sale by Musk may be gone, the threat “from a rising wave of competition and plenty of good alternatives for equity investment" are still around, Roth Capital Partners analyst Craig Irwin said.