Tesla drops again, bringing three-day loss to more than 18%

Elon Musk

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Tesla shares slid 9% on Thursday, building on the stock’s recent losses after the company’s largest outside shareholder reduced its position, and after the automaker said it would raise up to $5 billion in a new share offering.

With Thursday’s decline, the stock is more than 18% below Monday’s close, a day when the name surged following its stock split.

Tesla shares rose to a new intraday all-time high of $502.49 on Tuesday. The stock then ended Tuesday’s session 4.67% lower as Tesla announced that it would raise up to $5 billion through stock offerings “from time to time” and “at-the-market” prices.

Then on Wednesday,¬†Baillie Gifford, Tesla’s largest outside shareholder said it reduced its position in the company from around 6.3% to less than 5%, according to FactSet. The firm said that it intends to remain a long-term shareholder in the company and that the selling was purely due to portfolio restrictions. Tesla dropped 5.8% on Wednesday.

The recent weakness does little to dent Tesla’s more than 400% surge this year through Wednesday’s close, but it does suggest that some of the momentum behind the stock’s record run may be slowing.

In a note to clients Wednesday Credit Suisse said that four key factors have been driving the rapid appreciation in the shares, including short investors covering their positions as well as passive investors purchasing shares ahead of possible inclusion in the S&P 500. In other words, reasons beyond the company’s fundamentals are driving stock performance.

The firm did say, however, that September could prove to be a “catalyst-rich month for Tesla” with the company’s upcoming Battery Day, among other things.

Part of the stock’s recent run can be attributed to the company reporting record vehicle delivery numbers in July as well as a fourth straight quarter of profits. But the shares also jumped more than 80% between when the company announced a stock split on Aug. 11, and when it actually went into effect on Aug. 31 even though splits are purely cosmetic.

“After an absolutely insane move where its stock rallied more than 75% on nothing really more than news of a stock split, shares of Tesla are in the middle of a hangover as the stock is on pace for its third straight daily decline of roughly 5%,” Bespoke Investment Group said in a note to clients Thursday.¬†

Tesla’s decline on Thursday came amid a broad sell-off in shares of technology companies.

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