Tesla enters bear-market territory
December 21, 2021 - Tesla stock leapt by more than 70 per cent between January and November, peaking at $1,243.49. Since then, shares have crashed to below $900 -- Tesla is currently in a bear market -- falling by more than 27 per cent from its peak.
A stock enters a bear market when it falls 20 per cent on a closing basis.
Tesla’s stock surged by 35 per cent following a deal worth $4.2 billion with Hertz Global Holdings for 100,000 electric vehicles, revealed on October 25. Its EVs’ highly symbolic mainstream adoption results in Tesla’s market capitalisation passing the one trillion dollar mark to $1,235 billion by November 4.
Two days after the share and market cap peak, Tesla CEO Elon Musk tweets his 67 million Twitter followers. “Much is made lately of unrealised gains being a means of tax avoidance, so I propose selling 10 per cent of my Tesla stock. Do you support this?”
After receiving a resounding “yes” in reply, Musk rapidly sells his stock. By November 15, the share price was down to $1,013.39, an 18.5 per cent fall.
Most of Musk’s assets are in Tesla shares. Musk was awarded stock options -- an opportunity to buy shares at a discount -- in 2012 as part of his compensation plan. The plan allows him to buy 22.8 million shares at a strike price of $6.24 per share. The option he must exercise by August 2022 will cost $142.27 million. On Monday, Tesla shares closed at $899.94, meaning his gain on the shares totals just under $20.38 billion.
Musk has offloaded almost $13 billion of Tesla shares to pay his tax bill on these share options. Musk has said he will pay more than $11 billion in taxes this year, tweeting: “I’m paying the largest amount of tax of any individual in history.”