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Tesla’s Shares Dip Impacting Elon Musk’s Fortune

Tesla’s Shares Dip Impacting Elon Musk’s Fortune

Elon Musk’s recent Twitter activity sent Bitcoin in a downward spiral. Now, it appears his own company, Tesla, is tumbling with it. Shares in the electric vehicle-maker fell 2.2% amid a global rout in technology stocks and concerns of trouble in its China business.

As of yesterday (Monday 17th), Tesla’s Chief Executive Officer lost his position as the world’s second-richest person. According to reports, Musk now has a fortune of $160.6 billion. That’s a 24% drop from its January high, which placed the Tesla CEO at the top of the list. In total, his fortune has decreased by about $9.1 billion this year. As a result, Bernard Arnault, the LVMH Chairman worth $161.2 billion, overtook him. Amazon founder Jeff Bezos is firmly in the lead with a fortune of $190 billion.

Tesla’s Dip

Both Tesla and Elon Musk began 2021 on a high. In January, the CEO became the world’s richest person after Tesla’s shares grew almost 750% last year. This was due to surging demand in technology-driven stocks.

Fast forward to the end of the first quarter when the electric vehicle-maker announced its impressive $438 million profit. Ironically, Bitcoin contributed to this sum. Tesla bought $1.5 billion worth of Bitcoin during its first quarter but then sold 10% of it. This contributed $101 million to its revenue.

However, semiconductor shortages impacting the automotive supply chain continue to weigh on the company. That’s in addition to competition from traditional carmakers and China’s tech giants who are investing heavily in the electric vehicle (EV) sector.

The cracks continued to show after Musk announced Tesla had “suspended vehicle purchases using Bitcoin” on May 13th. The CEO’s tweet cited sustainability issues as the root cause – a direct conflict with the company’s environmentally friendly ethos.

Market analysts suggest the move might be an attempt to appease the concerns of its investors, who are focused primarily on sustainability and climate change.

“Environmental, Social and Corporate Governance (ESG) issues are now a major motivation for many investors. Tesla, being a clean energy-focused company, might want to work better in the environmental area of ESG,” says Julia Lee from Burman Invest.

Fuelling Bitcoin’s Volatility

After Tesla announced it would no longer accept Bitcoin as a form of payment, approximately $365 billion were wiped off of the whole cryptocurrency market. Bitcoin felt the impact after it tumbled 10.6% that same day (May 13th).

Bitcoin’s fluctuations were further impacted by speculative discussions that took place over the weekend. Questions were raised about whether Tesla had sold its stake in Bitcoin after a single-worded tweet made by the company’s CEO.

The tweet was in response to a user suggesting that if Tesla had sold off its Bitcoin holdings, it wouldn’t be surprising, particularly after all the hate Elon Musk was receiving. The conversation was enough to spook traders, and Bitcoin sank 10%.

However, Musk put rumours to rest when he tweeted yesterday that Tesla had, in fact, not sold off its Bitcoin holdings. The price of the crypto subsequently steadied. It traded up 3% at $45,436 as of 11:12 am on Monday in London.

Because of Bitcoin’s price fluctuations, which Musk’s tweets impacted, he has received a great deal of negative press. This has coincided with Tesla’s share drop.

Betting Against Musk

Michael Burry is betting against Tesla. The famed investor is known for making billions when he bet against mortgage securities during the 2007 – 2008 financial crisis.

According to a regulatory filing on Monday, Burry’s firm Scion Asset Management disclosed that it owned bearish put options on 800,100 Tesla shares as of March 31st. These are worth $534 million.

“Well, my last Big Short got bigger and Bigger and BIGGER,” Burry tweeted in February, referring to Tesla’s market capitalization. “Enjoy it while it lasts,” he concluded. Burry has since deleted his Twitter account.

Chief Strategist at Interactive Brokers LLC, Steve Sosnick, weighed in on the subject. “Tesla is down 14% since the end of the first quarter, so on balance, these puts have been profitable, though it’s impossible to know for sure,” he said. He then pointed out that Burry is “expressing the type of scepticism that many have on Tesla.”

To Sum Up

There are a number of factors that could have contributed to Tesla’s most recent drop in shares. From the reported troubles the firm’s China business is experiencing to its new ban on Bitcoin transactions and the recent sell-off of technology stocks could all be spooking investors.

However, as always, some feel differently. According to Market Watch, ANOM, an exchange-traded fund run by artificial intelligence, loaded up on Tesla shares at the start of May. The robot-run fund analyses data and attempts to predict market movement.

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