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Telsa shares have tended to rise as the Twitter deal looked less likely and fall as it looked more probable.
Justin Sullivan/Getty Images
Telsa
stock traded lower Monday, even after Chief Executive Officer Elon Musk pulled the plug on his purchase of social media site
Twitter
.
That wasn’t what was supposed to happen.
Investors may want to blame inflation. Or China.
Tesla (ticker: TSLA) stock gained initially, rising about 1% in premarket trading to $758.70 after gaining 2.5% on Friday, but the share closed down 6.6% at $703.03.
Estimates for the overhang in Tesla stock from Musk’s potential Twitter (TWTR) purchase range from about 5% to 15%. Given that range, it’s fair to ask why Tesla shares aren’t up if Musk is abandoning his bid.
What’s more, since Musk first offered to buy Twitter,
Telsa
stock tended to move down on any news that made it look more likely that the deal would go through. Investors were concerned that the purchase would be a distraction from running the electric-vehicle maker, which is also the source of most of Musk’s wealth.
Since Musk’s initial Twitter stake was disclosed, coming into Monday trading, Tesla stock was down about 34%. The
Nasdaq Composite
was down about 20% over the same span.
Tesla stock is more volatile than the overall market, going up more in good times and falling harder in bad times. Investors might have expected some underperformance given that the market has sold off broadly in recent months, but the span covered by Musk’s Twitter stake also includes Tesla’s blowout first quarter numbers. The company earned about $3.20 a share when Wall Street was looking for closer to $2.20 a share.
Tesla investors will want some of that underperformance back now that Musk is dropping his plan to buy. Dropping the bid, however, creates a new set of headaches. Twitter says that it will still try to enforce the agreement in court, so the saga appears likely to continue for some time.
What’s more, Chinese EV stocks weakened Monday because more Covid-19 testing there, with the potential for more lockdowns, have investors on edge. Shares in Chinese EV maker
XPeng
(XPEV) fell 8.8% Monday. The Hong Kong
Hang Seng Index
closed down 2.8%.
In the second quarter, lockdowns to fight Covid constrained production and created new supply-chain headaches for Tesla, as well as the entire auto industry. Investors had hoped Covid-related issues were behind them.
Non-Chinese EV makers had it tough too. Lucid (LCID) and
Fisker
(FSR) shares fell 7.3% and 4.6% Monday. Traders seem to be selling ahead of June inflation data coming Wednesday. The
Nasdaq Composite
finished 2.3% lower.
It was a tough day for tech investors. Twitter investors didn’t fare well either. Twitter shares closed down 11.3% at $32.65. That is a lot way from Musk’s bid of $54.20 a share.
The
S&P 500
and
Dow Jones Industrial Average
dropped 1.2% and 0.5%, respectively.
Write to Al Root at allen.root@dowjones.com