The largest external shareholder of Tesla Inc (Nasdaq: TSLA), Baillie Gifford, has trimmed its stake in the electric vehicle manufacturer due to portfolio restrictions (no stock can be greater than 10% of clients’ portfolios). The recent surge in share price has caused a considerable appreciation of the fund’s portfolio value.
During intra-day trading on Thursday, the stock fell as much as 14.7% before recovering partially to close at $407, reflecting a loss of 9% or $40.37 from the prior close. So far this year, the stock has gained over 465% as consumers across the globe are looking at eco-friendly transport systems.
A filing made by Edinburgh, UK-based asset management firm Baillie Gifford indicated that it had reduced its stake in the Palo Alto, California-based Tesla to 4.3% (worth ~$13 billion), from the 13.2% at the end of July. Following the shares sale, Baillie Gifford reaffirmed its confidence in Elon Musk’s founded company.
James Anderson, fund manager of the Scottish Mortgage fund, issued a statement detailing the need to minimize the stake in Tesla: “The substantial increase in Tesla’s share price means that we needed to reduce our holding in order to reflect concentration guidelines which restrict the weight of a single stock in clients’ portfolios.”
Clients of the fund are believed to have gained roughly $17 billion from the price appreciation of Tesla’s stock since January 1st, either via capital gains or banked profits.
Anderson, however, clarified that the fund would continue to remain as a significant shareholder of Tesla for the years to come. He further expressed optimism about the company’s growth prospects. Furthermore, Anderson opined that Tesla would no longer face any issue in raising capital if the need arises.
It can be remembered that Tesla had revealed its plans to raise another $5 billion through a fresh stock offering. In case the share price declines considerably, according to Anderson, Baillie Gifford will once again purchase an increased stake in Tesla.
Tesla reported better-than-anticipated second-quarter vehicle deliveries. The company also posted a fourth consecutive quarter of profits, paving the way for inclusion in the S&P 500. All these factors enabled Tesla’s share to appreciate rapidly.
Earlier on Monday, the company’s announced 5-for-1 stock split became effective, triggering a 12% surge in the company’s stock. The stock split has no real effect on the valuation of a company or its operations. It is done to increase liquidity and enable retail investors to participate with lesser investment.
As the fundamentals are strong, the stock is expected to bounce back in the days ahead.
The price chart indicates that the stock is moving along the ascending trend line, as shown in the image below. Additionally, the stock is trading above its 50-day moving average. The MACD indicator is also making new highs. Therefore, we are anticipating the stock to resume its uptrend in the days ahead.
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