Why today’s jump in Tesla shares surprised investors

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Many investors would have expected Tesla (NASDAQ: TSLA) shares to be sinking today. But the opposite is happening. After an early jump of 5%, Tesla stock was still 3.1% higher as of 1:30 p.m. ET. 

So what

That move was a bit surprising after it was revealed yesterday that CEO Elon Musk sold almost $7 billion worth of his Tesla shares between Aug. 5 and Aug. 9. Musk’s sales came at prices from about $838.5 to $912 per share. 

Now what

While the share sales themselves in no way affect the shareholder value in Tesla, Musk is a widely followed CEO, and his actions — and words — have moved the stock in the past. Musk later addressed his followers on Twitter to say the sales were in preparation for the potential purchase of the social media company. He is in a lawsuit with the company trying to back out of the agreement he previously made for the acquisition. 

But his sale of Tesla stock actually seems prudent in that context. If Musk loses the court case and is forced to acquire Twitter, he may need to come up with liquid capital. By selling some Tesla shares now, he avoids the potential for what he called “an emergency sale of Tesla stock.” 

That likely helped boost investor sentiment with Tesla today. There was other news yesterday that was taken as a positive development. Reuters reported that Tesla sold a little more than 28,000 vehicles from its Shanghai plant in July. While that was a huge drop from the record 78,906 vehicles delivered in June, it wasn’t unexpected. 

July production was heavily impacted by shutdowns related to upgrades that are intended to boost capacity at the critical plant by nearly 30%. The factory should now be able to produce more than 1 million vehicles annually. That’s more important news for Tesla investors who want to see it grow production by at least 50% per year for several more years. And it explains why the stock popped today, despite the news of Musk’s share sales. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why today’s jump in Tesla shares surprised investors appeared first on The Motley Fool Australia.

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More reading

• Elon Musk just sold US$7 billion worth of Tesla shares. What’s going on?
• Why the Tesla share price sank today
• Tesla shareholders approved a 3-for-1 stock split — is the stock a buy?
• Here’s why Tesla stock popped today
• Think you can’t afford to buy Tesla shares? Think again…

Howard Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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