Tesla sell-off worsens in wake of Musk’s store closures

Company declined to comment as more than $8 billion is wiped off market capitalisation

Elon  Musk described the winding down of many stores as a cost-cutting move that enables Tesla to offer a long-promised $35,000 version of the Model 3. Photograph:  Jens Schlueter/EPA

Elon Musk described the winding down of many stores as a cost-cutting move that enables Tesla to offer a long-promised $35,000 version of the Model 3. Photograph: Jens Schlueter/EPA

 

Tesla shares continued a steep sell-off in the wake of chief executive Elon Musk’s surprise move to close most of the electric-car maker’s stores and shift to online-only sales.

Many sales personnel first found out about the decision when Tesla published a public blog post Thursday afternoon, said three people familiar with the issue, who asked not to be identified discussing sensitive matters. A Barclays analyst cut his price target on the stock on Tuesday adding to a chorus of concerns raised by some investors also caught off guard.

Tesla declined to comment on the sales shift beyond Thursday’s blog post and an email Mr Musk sent employees later that day. Representatives didn’t immediately respond on Tuesday to inquiries about a Chinese media report that said Model 3 sedans are being held up by customs over labelling issues.

Stock has dropped

The stock has dropped as much as 16 per cent since Thursday, shaving more than $8 billion from Tesla’s market capitalisation.

The abrupt move by Mr Musk (47) shocked Alex Chalekian, the founder and chief executive of Lake Avenue Financial in Pasadena, California. The firm, which manages more than $150 million in client assets, sold all of the Tesla stock held for advisory clients on Friday.

“This was a total 180-degree turn,” Mr Chalekian, who owns a black Tesla Model S, said in a phone interview on Monday. “Tesla had been talking about expanding stores, and all of a sudden they are closing them. To me, this signals a huge financial concern and a possible cash-flow issue for Tesla.”

378 locations worldwide

Until last week, Tesla’s store strategy seemed to be one of expansion. The company opened 27 new retail and service centres last quarter, resulting in 378 locations worldwide, according to its letter to shareholders. It was the most openings for a quarter since mid-2017.

Tesla also suggested a brick-and-mortar retail strategy was important in its annual report filed on February 19th, just nine days before Musk announced the pivot to online sales.

Mr Musk described the winding down of many stores as a cost-cutting move that enables Tesla to offer a long-promised $35,000 version of the Model 3. – Bloomberg