What happened
Shares of Tesla (TSLA 1.85%) fell sharply this week. At its worst point during the week, shares fell as much as 16.6%. But the growth stock closed the week out with a total decline of 15.4%, according to data from S&P Global Market Intelligence.
Image source: Tesla.
So what
The stock's gain was driven by news that Tesla founder, CEO, and major shareholder Elon Musk was selling some of his shares of the company. Last weekend, Musk took to Twitter to poll users on whether he should trim his stake in the company by 10%.
"Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock," he said. "I will abide by the results of this poll, whichever way it goes." With 57.9% of respondents voting yes, he seems to be following through. During the week, Musk unloaded more than $5 billion worth of Tesla shares.
Now what
Of course, Musk still has more selling to do if he wants to get to his target of liquidating 10% of his stake. This target translates to roughly $20 billion.
Even after selling 10% of his stake in the company, the billionaire would still notably own about 20% of Tesla shares. So it would be difficult to critique Musk's sale as a bearish signal; he'd still be betting heavily on the stock after the sale.
While we don't know what Tesla stock will do next week, further selling could pressure shares more. But it's simply impossible to know where shares will trend if the selling continues beyond that. Investors, therefore, should refrain from making investment decisions based on near-term speculation. Instead, they should stay focused on their view of the long-term potential of Tesla's business and how that holds up to the stock's current valuation -- and they should make their investment decisions based on that analysis.
