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Deal
A drop in the price of Bitcoin this week spilled over into Tesla shares, cutting more than $ 110 billion from the electric car maker’s value and about $ 20 billion from CEO Elon Musk’s net worth as he hit the funds traded that they had the shares.
FILE PHOTO: A man wearing a face mask after the coronavirus disease (COVID-19) outbreak walks alongside Tesla Model 3 sedans and Tesla Model X sport utility vehicle in a new Tesla showroom in Shanghai, China, May 8, 2020. REUTERS / Yilei Sun / File Photo
LONDON: A drop in the price of Bitcoin this week poured into Tesla shares, cutting more than $ 110 billion from the electric car maker’s value and about $ 20 billion from CEO Elon Musk’s net worth as he hit. the exchange-traded funds that the shares held.
Bitcoin plunged as much as 17.2% earlier in the day, setting a tone of weakness in the cryptocurrency markets as investors abandoned leveraged bets. It was recently down 10.8% to $ 48,318 at 1343 GMT.
Tesla shares fell 7.3 percent to $ 662.3 when US markets opened. The electric car maker this month revealed a $ 1.5 billion investment in Bitcoin.
The drop in Tesla also hit exchange-traded funds (ETFs) like ARK Innovation ETF and ARK Autonomous Technology & Robotics ETF, down 8.9% and 7.3%. Both ETFs count Tesla as their largest individual holding.
A Germany-based trader said he was “pulling chips off the table” from Tesla, as his $ 1.5 billion investment in the cryptocurrency could “backfire now.”
The losses come amid a broader market slowdown in recent days that has seen investors sell shares in a wide range of assets that have seen big rallies in recent months, from tech stocks to cannabis to solar ETFs. .
The Nasdaq High-Tech Composite Index was down 2.6% this week, while the Dow and the S&P were down 0.7% and 1.8%, respectively. Benchmark 10-year Treasury yields stood at 1.3619% after rising nearly 45 basis points this year, a move that has threatened to dampen the appeal of stocks and other comparatively risky investments.
However, some investors may have been bracing for a downgrade in the ARK Innovation ETF. Amy Wu Silverman, equity derivatives strategist at RBC Capital Markets noticed an increase in demand for protection against a decline in that ETF.
“For anyone living under a rock, the ARKK ETF has been the model for the high flyers and is loved by retail,” Silverman wrote.
Meanwhile, the Graniteshares 3X Long Tesla Daily ETP, a leveraged exchange-traded product intended to triple daily movements in Tesla shares, was down more than 32% in London.
While Tesla has long campaigned to reduce global car emissions by using its relatively environmentally friendly cars, Elon Musk’s decision to invest in Bitcoin could weigh on Tesla’s ESG rating, he told Reuters Valentijn van Nieuwenhuijzen, chief investment officer at asset manager NN IP told Reuters on Friday. .
Meanwhile, analysts at Barclays noted that there was a drop in conversations about the company on Reddit’s WallStreetBets forum, which could explain some of the loss of appetite for the shares.
“With only 2-3 presentations in total each of the last few days, we remain below the trend in attention that has come along with the big jumps in returns in the past,” analysts said in a note.
Tesla remains one of the most expensive components of the S&P 500 index, trading at about 163 times its 12-month future earnings.
While betting on a drop in value has failed spectacularly in the past, the short interest in Tesla shares still held at 5.5%, according to Refinitiv data.
(Reported by Julien Ponthus, Thyagaraju Adinarayan, Karin Strohecker, Aaron Saldanha, and Megan Davies; edited by David Evans)
