By CCN: The Wall Street Journal reports that T. Rowe Price Associates dumped around 81% of its Tesla stake during the first quarter of 2019. This is a brutal rebuke to the Elon Musk-led company, as T. Rowe Price has been one of the largest holders of Tesla stock over the years.
T. Rowe Price held just 1.7 million shares of Tesla on March 31 this year, down substantially from the 8.9 million shares it owned at the end of 2018. Its stake in the EV company is now at its lowest level since 2013.
The fund manager’s massive cut in its TSLA position doesn’t seem entirely surprising, as the stock has lost more than 30% of its value so far in 2019. The S&P 500 has gained more than 14% over the same period, making Tesla stock a laggard when compared to the broader market.
Earlier in May, it emerged that three of Fidelity’s mutual funds sold a combined 1.4 million shares. The asset manager is Tesla’s second-largest institutional investor, ahead of T. Rowe Price.
So what’s causing this mass exodus of deep-pocketed Tesla stockholders despite Elon Musk’s claims that the stock could be headed to a $500 billion market cap thanks to its self-driving cars? Analysts believe that Tesla’s delivery issues and tensions between regulators and Musk are taking a toll on the company’s operational execution.
The company’s Q1 delivery numbers were way below expectations, with Elon Musk blaming logistics challenges for Tesla’s poor performance.
In such a scenario, Musk needs to focus on sorting out the operational challenges that Tesla is facing instead of making tall claims about how self-driving cars will transform its business in the long run.
The fact that T. Rowe Price divested its Tesla position while also pouring capital into rivals such as Cruise Automation indicates that institutional investors don’t have much confidence in Elon Musk’s self-driving dreams.
The fund manager led a $1.5 billion investment Cruise Automation earlier this month, giving the latter a much-needed cash infusion as it seeks to launch its autonomous vehicles by the end of the year.
It is not surprising to see that investors who were once bullish about Tesla are now looking elsewhere to ride the self-driving boom. After all, Musk has given an unrealistic timeline of putting fully-autonomous cars on the roads by next year while consumer watchdogs raise serious questions about the safety of Tesla vehicles.
Assuming Musk fails to deliver on his grand plan of putting autonomous vehicles on city streets by next year, don’t be surprised to see Tesla stock racing to the bottom. T. Rowe Price didn’t want to take that chance and unloaded its shares, and it might be time for retail investors to do the same.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN Markets.