Tesla Shares Fall After Company Discloses Large Seller

Electric vehicle giant Tesla saw its shares tumble after the disclosure of another large seller.

Baillie Gifford’s Tesla stake decreased by more than 19 million shares since the end of June. Despite the decrease, the actual value of that stake increased by nearly 50% as prices more than doubled.

In an SC-13G/A filing with the Securities and Exchange Commission, Tesla said that Scotland-based Baillie Gifford & Co. had reduced its stake to 39.63 million shares, or 4.25%.

Baillie Gifford had previously disclosed a stake of 58.86 million shares as of June 30, or 6.32% of the shares outstanding according to FactSet, making it the second-largest shareholder, behind only Chief Executive Elon Musk’s 18.3% stake. The firm is now fourth on the list of Tesla’s largest shareholders.

Baillie Gifford said it sold the stock to meet internal guidelines that limit the percentage of the portfolio that could be invested in a single stock, according to a Wall Street Journal report.

Shares fell 5.8% to $447.37 in active trading, to mark the biggest one-day decline in about six weeks on Wedneday. The stock has now tumbled 11.4% since it closed at a record $498.32 on Monday, when its 5-for-1 stock split took effect.

Tesla also announced recently that it would sell up to $5 billion worth of its stock.

On a more positive note, BofA Securities analyst John Murphy raised his price target to imply a near-30% gain from current levels.

Murphy wrote, “It is important to recognize that the higher the upward spiral of [Tesla’s] stock goes, the cheaper capital becomes to fund growth, which is then rewarded by investors with a higher stock price.”

Murphy raised his stock price target to $550. The analyst said Tesla’s stock-sale announcement on Tuesday corroborated his view that Tesla will take advantage of the rally to raise “low-cost equity capital” to fund accelerated growth.

“It is important to recognize that the higher the upward spiral of [Tesla’s] stock goes, the cheaper capital becomes to fund growth, which is then rewarded by investors with a higher stock price,” Murphy wrote in a note to clients.

Disclaimer: We have no position in Tesla Inc. (NASDAQ: TSLA) and have not been compensated for this article.