Hedge Funds May View Tesla's S&P Sell-Off As A "Negative Catalyst"

Tesla faced what appeared to be its first reality check in years in trading on Monday. After being included into the S&P 500 index, Tesla shares finished the day down 6.49%, falling $45 per share amid a coming implied volatility collapse and liquidity triggered "normalization" that very well could prevent Tesla from being pushed higher by call option buys, they way it has been over the last year or so.

Roth Capital Partners analyst Craig Irwin told Bloomberg on Monday that the sell-off could be considered a negative catalyst: “Hedge funds will treat this as a negative catalyst for Tesla given buying pressure eases off very quickly.”

Bernstein analyst Toni Sacconaghi had also noted in early December: “There is strong precedence for positive returns for stocks prior to S&P 500 inclusion and post-announcement, but a very limited precedent for near term outperformance post inclusion.”

In other words, the gravy train could be coming to an end. 

This comes after a flurry of institutional investing on Friday that culminated in almost $60 billion in stock changing hands at a price of $695. Throughout the entire session, more than $150 billion in Tesla shares traded hands. 

Tesla stock wasn't helped along much on Monday when we noted that Apple was throwing its hat into the self-driving car business. Tesla shares slipped to their lowest of the day on the news, while Apple shares perked up to their highs of the day. In addition to designing self-driving vehicles, Reuters also reported that Apple's cars could "include its own breakthrough battery technology".

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Craig Newman 3 weeks ago Member's comment

What sell off? The 695 print was a scam.