How Tesla Stock Price Could Affect Markets

Mr. Musk has sold large tranches of Tesla stock before. Last year, he sold some 15 million shares, worth more than $16 billion, in two months. Those sales didn’t appear to drive down Tesla’s price significantly, though it’s not known if the price would have gone up if it hadn’t been selling.

Tesla is a component of both the S&P 500 and the Nasdaq Composite Index. In addition to being barometers of US stock performance, both indices are reflected in numerous widely invested mutual funds.

The S&P 500, considered the US benchmark index, weights companies according to their market value. Tesla, worth around $900 billion, is one of the most influential stocks in the index.

For every dollar Tesla shares fell on Tuesday, the S&P 500 lost 0.099 points, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. That means the drop in Tesla shares accounted for almost a tenth of the drop in the S&P 500 on Tuesday.

“So it had a very big impact,” Silverblatt said, but “not the highest.” Apple, with almost three times the valuation of Tesla, has much more impact. Its shares’ 3.7 percent drop on Tuesday contributed more to the decline in the overall index.

Tesla is a famously volatile stock. Tuesday’s 12.2 percent drop was its worst daily drop since September 8, 2020, when it lost about 21 percent of its value. But in the past six months, Tesla shares have fallen nearly 12 percent twice, on November 9 and January 27.

Some, including Musk, have at times suggested that Tesla is overvalued. Among those who believe in Tesla’s valuation, which is much higher than rival automakers relative to the size of its operations, much of the argument hinges on the Musk administration. Even Tesla acknowledges this, stating as a risk in its most recent quarterly report: “We rely heavily on the services of Elon Musk, Tesla’s tech king and our CEO. Although Mr. Musk spends a lot of time with Tesla and is very active in our management, he does not devote all of his time and attention to Tesla.”

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