News: Tesla shares in the red for 2021 as bitcoin selloff weighs.
LONDON (Reuters) – Tesla shares were expected to plunge into the red on Tuesday, driven by a widespread sell-off of soaring tech stocks and the decline in Bitcoin, in which the electric automaker recently invested $ 1.5 billion.
At 1121 GMT, Tesla was down over 6% in US premarket deals after falling 8.5% in the previous session.
The Elon Musk-led company has had a stellar ride since 2020, starting at around $ 85 per share before hitting the $ 900 mark on Jan. 25.
The stock, currently trading at around $ 673 in pre-market trades, is down 25% from its high, which is above the 20% level that technically defines a bear market.
Bitcoin has also turned into a bear market, falling from a high of $ 58,354 on Feb.21 to a low of $ 45,000 the previous Tuesday.
A German-based trader said he had “taken chips off the table” from Tesla because its $ 1.5 billion investment in the cryptocurrency “could now backfire”.
One of the factors contributing to the rise in inventory levels is increasing retail and institutional demand for green, social and governance friendly (ESG) investments.
“There are many reasons – purely for sustainability reasons – to keep Tesla. This is part of this transformation towards a more sustainable business model,” Valentijn van Nieuwenhuijzen, chief investment officer at asset manager NN IP, told Reuters on Friday.
However, he added that Elon Musk’s decision to invest in Bitcoin could weigh on Tesla’s ESG rating.
The billionaire was criticized for praising Bitcoin before Tesla bought the cryptocurrency.
Its role in fueling the retail frenzy in the stocks of US video game chain GameStop and raising the price of meme-based digital currency dogecoin has also come under fire while it is recognized by a large fan base.
Barclays analysts noted that Reddit’s WallStreetBets forum had fewer conversations about electric car makers, which may explain some of the loss of appetite for the stock.
“With only 2-3 submissions in each of the past few days, we are staying below the attention trend that has historically been accompanied by large leaps in returns,” the analysts said in a note.
Other analysts have also warned against investing in the stock, which remains one of the most expensive in the S&P 500 index, with 163 times its 12-month forward earnings.
While investing in betting against the company’s stocks has backfired spectacularly in the past, short interest in Tesla stock was still 5.5%, according to Refinitive data.
Graphic: Tesla shares sell off after multiple gains –
Reporting by Julien Ponthus, Thyagaraju Adinarayan and Karin Strohecker; Adaptation by David Evans
Original Source © Reuters