- Tesla stock fell 6% on Tuesday, falling well below its S&P 500 index inclusion price of $695.
- The stock has come under pressure amid a sell-off in tech and as investors grow weary of Musk's Twitter deal.
- Tesla's stock is on the verge of flashing a bearish death cross, a technical analysis sell signal.
Tesla stock fell 6% on Tuesday $627.65, solidifying its decline below the price when S&P Dow Jones Indices added it to its popular S&P 500 index.
Tesla was added to the S&P 500 on December 21, 2020 after the company reported more than four consecutive quarters of profits. Tesla stock was trading around $695 per share when it was added to the index.
The decline in Tesla comes amid a broader sell-off in tech stocks, with the Nasdaq 100 index officially in bear market territory, down 29% year-to-date. Tesla stock is down 39% year-to-date, and is down about 50% from its record high.
The decline has likely been exacerbated by Tesla CEO Elon Musk's $44 billion deal to acquire Twitter. That has turned into what Wedbush's Dan Ives calls a "circus," as Musk is now attempting to put the deal on hold due to the issue of how many fake accounts are on the platform.
But Musk signed a contract with Twitter, agreed to a $1 billion break up fee, and waived his right to perform due diligence, as outlined in Twitter's SEC filing about the deal. All of this drama is wearing thin on Tesla investors, according to Ives.
"This circus show has been a major overhang on Tesla's stock and has been a black eye for Musk so far how he has handled this spiraling situation in our opinion. We believe with the Twitter shareholder meeting on the horizon and approval for the deal expected, Musk is facing a fork in the road situation in which he has to decide his next step in this soap opera as Tesla investor patience is wearing very thin," Ives said in a Monday note.
Also not helping Tesla stock is an imminent death cross, which is a bearish sell signal in technical analysis that alerts traders to a solidifying downtrend in the stock price. The death cross occurs when the 50-day moving average falls below the 200-day moving average, which is on track to happen before the end of this week.
The lagging indicator means Tesla stock is likely to experience a continuation in a declining stock price, which could once again feed into further weakness as Musk has pledged millions of Tesla shares as collateral to purchase Twitter. lower stock prices.
"If the Twitter deal were to close today and subsequently Tesla's stock price dropped to $350-400, Musk could be forced to sell ~13M Tesla shares," Bernstein analyst Toni Sacconaghi said in a note on Tuesday. That potential margin call is just one more reason why some Tesla investors are likely concerned about Musk's deal to buy Twitter, aside from it potentially taking away Musk's attention from managing Tesla.
