Tesla Stocks Enters 10% Correction As Post-Election Rally Fades

Topline

The post-election rally for Tesla stock lost more steam Thursday, as shares of the company led by centibillionaire Elon Musk tracked toward their second 5% or worse loss in three days, with a reported move from the Musk-backed administration of President-elect Donald Trump weighing on the electric vehicle giant’s share price.

Key Facts

Tesla stock fell 5.2% to $313 by late afternoon, with a 2.2% loss in morning trading accelerated by a Reuters report on the Trump transition team reportedly moving to end the $7,500 federal tax credit for electric vehicle purchasers, citing anonymous sources.

Thursday’s loss officially sent Tesla stock into correction territory, with its share price down 10.3% from Monday’s $350 close.

Still, Tesla stock remains up almost 25% since last Tuesday as investors flooded into the Musk-led firm as a response to Musk’s close relationship with Trump and the prospect for an easier path for Tesla’s autonomous driving initiatives to pass regulatory hurdles, with the latest negative whipsaw taking the wind out of the 39% rally from Election Day through Monday that left some analysts “surprised.”

Shares of Rivian, the next-largest American electric vehicle company (though it’s worth just 1% of Tesla), fell 14% in Thursday trading, while the broader market suffered a slimmer loss, with the S&P 500 and tech-heavy Nasdaq declining more than 0.5% apiece.

Chief Critic

“This is not a surprise in any way as we fully expected Trump will rip away the EV tax credit once he gets into the Oval Office in January,” Wedbush analyst Dan Ives wrote in a Thursday note to clients. Ives reiterated the tax credit cancellation is a “net bullish move for Tesla and Musk over time” as it will hurt the EV market dominator Tesla less than smaller players.

Tangent

Jefferies analysts posited a move for Tesla that may prove unpopular at least temporarily with shareholders: raising equity capital. “Tesla should take advantage of” the recent rally equating to a “proxy for Elon Musk’s wider interests on expectations of de-regulation driving growth across separate businesses” and build its balance sheet, the group led by Philippe Houchois wrote in the Thursday note to clients. Such a move, though common for companies whose stocks enjoyed sudden surges, can provide downward pressure on a company’s share price as it dilutes the value of existing shares.

Crucial Quote

“How much or how long markets ignore potential conflicts of interests ranging from political responsibilities to governance and compensation, is unclear,” wrote Houchois about Musk’s expected heavy involvement with the Trump administration.

Forbes Valuation

Musk’s net worth fell another $9 billion Thursday to $300 billion, extending his three-day loss to $20 billion, according to Forbes’ estimates. Musk, who owns 13% of Tesla and has another 9% in stock options pending an appeal in Delaware court, is still about $35 billion richer than he was prior to the election and roughly $70 billion wealthier than the next-richest person on the planet, Oracle chairman Larry Ellison at $229 billion.

Big Number

$120 billion. That’s about how much market capitalization the $1.01 trillion Tesla has lost since Monday’s close at more than $1.1 trillion. Tesla eclipsed a $1 trillion valuation for the first time Friday since early 2022.

Further Reading

ForbesWhat We Know About Elon Musk’s ‘Department Of Government Efficiency’—Staffed By 80-Hour-A-Week ‘Revolutionaries’By Derek Saul
ForbesTesla Stock Dips 6% As Post-Election Surge Cools OffBy Derek Saul