Tesla Inc. (NASDAQ:TSLA) is trading at a valuation of $917.15 after losing more than 12% in the last three days. This comes after an insider sale by Elon Musk valued at $4.5 billion. While insider sales often signal a stock that is fully valued or price collapse fears, this sale is different.
Elon Musk is actualizing his offer to buy Twitter. This means that the recent sale of Tesla shares was not because of any insider information. Instead, the sale was made for the sole purpose of raising the cash needed to finance the Twitter deal. Investors should relax because there is nothing wrong with Tesla.
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Last week, news came out that Bill Gates holds a $500 million short position on Tesla. Our analysis then indicated that Tesla was unlikely to shed value due to that news. This perspective is maintained. Traders and investors on this counter should not interpret this week’s decline as related to the short position.
Tesla is trading at a lower valuation
Tesla lost more than 12% since Elon Musk started selling shares on April 26. The decline sent the stock to an intra-week low of $821. The stock has since recovered after it emerged that Elon would not be selling any more shares. At the current valuation of $917, the stock is still highly discounted.
Summary
Tesla became highly discounted as Elon Musk sold to finance the Twitter buyout. The stock hit an intra-week low of $821 but has regained value. At $917, Tesla is a strong buy.
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