Tesla briefly sinks below price at which it entered S&P 500 index

The stock dropped as much as 13 per cent to US$619 (S$817) in New York, its biggest intraday decline since Sept 8. PHOTO: AFP

NEW YORK (BLOOMBERG) - Tesla shares wiped out their year-to-date gains on Tuesday (Feb 23) and briefly traded below the level where they were when the electric-carmaker entered the S&P 500 Index in December.

The stock dropped as much as 13 per cent to US$619 (S$817) in New York, its biggest intraday decline since Sept 8, before paring much of the loss to close down 2.2 per cent. The stock was down 31 per cent from its Jan 25 record intraday high at its lowest point on Tuesday.

Tesla's early-week decline amid a wider market selloff was fueled in part by chief executive officer Elon Musk's comments over the weekend that the prices of bitcoin and smaller rival ether "do seem high."

"Tesla is an EV play entering the golden age of EVs and there is a lingering worry that the Bitcoin sideshow could overshadow the overall EV growth story playing out for Tesla in 2021 and beyond," Wedbush analyst Daniel Ives wrote in a note to clients.

The concerns over the value of the cryptocurrency helped erase some of bitcoin's gains, which had rocketed to new highs after Tesla announced two weeks ago it added US$1.5 billion in the cryptocurrency to its balance sheet. Bitcoin fell as much as 18 per cent to US$45,000 Tuesday.

However, there are other recent factors that may also be taking the shine off Tesla's valuation. The company's decision to stop taking orders for the lowest-priced version of its Model Y electric SUV, as reported by Electrek earlier this week, may also be dampening investor enthusiasm, Ives said. "Tesla stopping sales of its lowest price Model Y coupled by continued price cuts have led to Street demand concerns as the bears come out of hibernation mode," Mr Ives added.

In addition, a continuous stream of EV development news from traditional automakers such as General Motors and Ford Motor, as they prepare to go all in on the electrification race, has emphasized that Tesla isn't the only way to get exposure to the upcoming transformation in the auto sector.

Smaller electric-vehicle stocks, which typically take their daily trading cues from Tesla, also dropped sharply on Tuesday.

Join ST's Telegram channel and get the latest breaking news delivered to you.