Why Tesla shares dropped below $200 on Monday

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

Tesla (NASDAQ: TSLA) is already dealing with COVID-19-related issues at its most productive facility in Shanghai, China. But other factors are weighing on the stock today, too. That has led to a decline in the shares this morning, with the stock reaching its lowest level in 18 months. As of 11:43 a.m. ET Monday, Tesla shares were down 5%.

So what

Tesla’s China plant recently was upgraded for the ability to produce an annual capacity of about 1.1 million vehicles. But last week, Barron’s reported that the facility shipped 71,704 electric vehicles in October, down from the record 83,135 delivered the previous month. China’s strict COVID-19 policies, which have resulted in lockdowns throughout the region, have negatively affected productivity.

That has also impacted consumer demand in China, and it might be partly why Tesla recently lowered prices for Chinese customers. But another factor could be weighing on Tesla shares today, too, and it doesn’t have to do with the business itself.

Now what

Now that Tesla CEO Elon Musk has taken Twitter private, the entrepreneur has one more major item on his plate. But that might not be the biggest concern for Tesla investors. Musk used some debt to buy Twitter, and interest payments will need to come from either the business’s cash flow or some other source. Several companies have announced a suspension in advertising on Twitter until the new direction of the social media site is more clear. That could mean lower cash flow, and Musk might need to service the debt interest payments from his own funds.  

The problem for Tesla shareholders is that Musk might have to sell more Tesla stock if he needs to raise short-term cash. That could be what is now impacting Tesla stock, or it could be other shareholders trying to game that potential.

For long-term investors, however, that shouldn’t be a concern. In fact, for those wanting to hold Tesla stock for years, this could be a good chance to start a position at a better price. 

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

The post Why Tesla shares dropped below $200 on Monday appeared first on The Motley Fool Australia.

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Howard Smith has positions in Tesla. 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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