Tesla Dips Into Bear Market Territory Following News Of SEC Solar Panel Probe

Tesla Inc TSLA shares officially dropped into bear market territory on Monday following news of a new probe into the company’s solar panels by the U.S. Securities and Exchange Commission.

What Happened? After hitting a new all-time intraday high of $1,243.49 in early November, Tesla shares dipped below $994.79 on Monday. That level marks a 20% drop from recent highs, which is the technical level marking the transition from a bull market to a bear market.

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Why It’s Important: After a huge breakout to the upside in October, Tesla has spent the last month consolidating.

Tesla technically broke into bear market territory briefly in intraday trading on Nov. 15 before bouncing to close the day above $1,000. However, the subsequent rally failed to make it to new highs, suggesting Monday’s closing price could be critical. Technical market traders typically view a close below a key support or resistance level as more important than a false intraday breakout.

The stock ultimately ended Monday's session at $1,009. 

Monday’s weakness comes after Reuters reported the SEC is investigating whistleblower claims suggesting Tesla’s solar panels have undisclosed defects that cause fire risks. Tesla CEO Elon Musk has repeatedly antagonized the SEC since he agreed to a $40-million fraud settlement back in 2018.

“SEC, three letter acronym, middle word is Elon’s,” Musk tweeted last year.

Some of the selling pressure Tesla investors have endured since the beginning of November has come from Musk. Musk has already sold 10.1 million shares since early November in coordination with exercising options to buy additional Tesla stock. Musk has pledged to sell 10% of his Tesla holdings, suggesting he could be dumping an additional 7 million shares in coming weeks.

The good news for Tesla investors is that the volatile stock has briefly dipped into bear market territory multiple times in recent years only to break back out to the upside shortly thereafter. After peaking at $900.40 in February 2021, the stock dropped back down to as low as $539.49 in March, a peak-to-trough decline of more than 40%.

Benzinga’s Take: Tesla is by far the most volatile stock among megacap S&P 500 companies. Tesla’s market cap is $977 billion and its beta is 2.05. The next largest S&P 500 company with a beta of at least 2 is Freeport-McMoRan Inc FCX, which has a market cap of only $54 billion.