Tesla stock rebounds after Elon Musk’s $5B sale, Rivian soars on IPO

Yahoo Finance Live's Brian Sozzi, Julie Hyman, and Emily McCormick discuss the stock rebound for Tesla after founder Elon Musk sells $5 billion of his shares following a Twitter poll, while EV newcomer Rivian tops expectations in its IPO debut.

Video Transcript

JULIE HYMAN: But first off, we have to talk about what is happening with Tesla. Following that Twitter poll earlier in the week, Elon Musk indeed did sell some Twitter shares, not a 10% stake as was laid out in that poll but about half of that at this point, $5 billion worth of stock, a little less than half that I should say, $5 billion worth of stock, 4.5 million shares this week is what that represented. It had to do with the options that the Tesla founder, excuse me, had to exercise and taxes related to that. We don't know whether he's going to sell that full 10% at any point but you know, it is interesting here that this is all going on, Emily.

EMILY MCCORMICK: It is interesting here that it's all going on. And also interesting to see Tesla stock now actually moving higher here. This could be a little bit of sell the rumor, buy the news type trading action happening among investors here. Because of course, we had seen Tesla's stock plunge over the beginning of this week after that Twitter poll had decisively shown a majority of people who had casted their votes wanted to see Elon Musk actually sell that stake, of course, in Tesla.

But I think what a lot of investors have forgotten here, or at least and forgotten when this Twitter poll had first come out over the weekend, was as you were mentioning, Julie, the fact that Elon Musk does have these options that are expiring in August of next year. And because of that, it had already been widely expected that he was going to sell somewhere around 5% to 6% of his stake. Because we have to remember that he doesn't actually receive a salary from Tesla. So if he were to exercise these options and receive, of course, profits as a result of that, he would have to sell additional shares in order to make up for that tax bill here. So that had been something expected by the Street. 10% would be a little bit higher of a stake sale than they had been expecting heading into this.

And then one other thing that I want to highlight coming from Dan Ives of Wedbush here in terms of some Wall Street commentary, he actually mentioned that this is potentially a good thing for the stock to see these sales taking place now. It's in a sense allowing Musk to rip a Band-Aid off here and sell this portion of the stock quickly, rather than having it linger as a fund-- as an overhang for the stock heading into next year. So potentially a little bit of upside here in this news as well, even though we did see the stock sell-off earlier this week as a result of that.

BRIAN SOZZI: I think this whole ordeal, guys, was a wake-up call to a lot of the Tesla bulls out there that you know, the next couple of years might be a little different for Tesla. I know the fundamental story is improving here but you are likely to see Musk continue to diversify his own portfolio. It's not to say that he's going to come out again two weeks from now to sell more stock but it is something you have to be mindful on moving forward here, so a good reminder here.

And secondarily, next thing, Julie, I think investors need to start thinking about is life after Musk. I mean, he has suggested, I would say over the past year you know, there will be coming a time let's say, over the next five years, that maybe he is not the CEO of Tesla. So I think this is a-- you have to start thinking about these things today.

JULIE HYMAN: I guess so. And if we've seen some other recent examples, Amazon after Bezos as CEO, a little bit rocky first quarter round. I mean, not a founder, but Disney post-Iger I think is also relevant to this discussion and we'll talk about that in just a bit.

First, though, we got to talk about the other big electric car mover that we've been watching and that, of course, is Rivian, which came public yesterday. Priced those shares at $78 each, the stock closed at $110.73. Remember when we were watching those indications following them yesterday morning, I think the indications were as high as $120, $130 even, but they did not open as high as that level.

A couple of interesting things to note when we talk about this Rivian IPO, one of them is that there was an allocation for people who had put in pre-orders on the cars. So that was an interesting way if people wanted to yeah, maybe buy a car but also buy those Rivian shares. And then we're going to talk as we said to SoFi in just a bit, and some of the shares were allocated for retail investors through that platform. We've seen an increasing number of companies, of IPOs do that as of late.

What I also find interesting, you guys, about the Rivian story, is-- and this is something I touched on yesterday, just the sheer demand for hot issues like this. Whether you're talking about electric vehicles or no-- and this comes back to if I can tie it all together, the inflation story yesterday. Why? Because as the Fed moves more quickly than anticipated what is this going to do to Rivian itself, to future Rivians, right, future hot issues coming to market, and just all of the thirsty cash that has been pouring into the market over the past year in search of buzzy places to go, right, Sozz?

BRIAN SOZZI: Yeah. No, I would say this buzz and these strong reactions have been fueled in large part because of this very low interest rate environment. But it will be-- the next one to watch if playing these EVs is your thing, you like trading these first-day pops for whatever reason, you know, it's a volatile market out there, it's Polestar. Now, that Polestar SPAC will be coming to market sometime pretty soon here. Obviously, they don't have the same buzz as a Rivian here but if you're the team at Polestar, and we've talked to them here, you have to be very excited about the potential first week of trading for your stock when you come public because of this Rivian.

Secondarily, I mean, the expectations now built into Rivian, at one point yesterday you saw this company with a market cap of $104 billion. I mean, it closed the day at about $98 billion here but the market is pricing here really this company is going to dominate the next decade in electric vehicles. I don't think that's the case but still, they now have a lot, a lot to prove.

EMILY MCCORMICK: Well, Brian, and to that point here, it really isn't just Rivian. It really is the electric vehicle space as a whole. And to your point, Julie, it really is this question of where is all this free money going to be going here? Investors are really searching for, again, to your point, Brian, the winner for the next 10 years.

And I think we've seen this in the stock prices and in the valuations of a number of electric vehicle makers as a whole here. I mean, just to name one other one here, Lucid Motors shares are up more than 300% for the year to date, and it's more than doubled in the past six months alone. And this is another carmaker or electric carmaker that doesn't even have sales yet. And I think because this is such a nascent space, given all the various use cases for electric vehicles that are currently being explored, whether it's on the consumer side or for delivery vehicles or trucking, for example, with Rivian. There just is this huge amount of speculation going on about who's going to be the winner here.

And I think if we look at Tesla, and of course, the incredible run-up that that stock has had, perhaps more so in 2020 than in this year but even this year as well, it gives investors a lot of hope that even for some of these companies that have no sales or that are in pre-revenue states right now, will ultimately be able to post just tremendous amounts of growth here. So I think that's something that a lot of investors are looking for and why they're willing to pay these premiums here without necessarily seeing the fundamentals at this point to back up these companies.

BRIAN SOZZI: Julie, I think you can appreciate this quick hot take here, you're seeing some of the valuations on Tesla, now Rivian, really trading as if gas-powered cars will not be around a decade from now. I mean, certainly, you've seen countries overseas put the clamps down on when, how much longer these car companies can sell gas-powered cars as a result of climate change. But I mean, you look at the valuation on Rivian, I mean, to me at a market cap over $104 billion yesterday suggests you know, these gas-powered cars are just not going to be around for much longer.

JULIE HYMAN: I mean, maybe not a decade from now. But two decades from now, three decades from now? I mean, and guys, you know, I think both of you framed it, who's going to be the winner? They're all going to be the winner. There doesn't just have to be one winner. There's a big car market out there and OK, let's say even if gas-powered cars don't go away, I think it's safe to assume the market share is going to go way, way down because it's being regulated out of existence.

And so people aren't just going to buy Rivians, they're going to buy Rivians, and Lucids, and Teslas, and Fords, and GMs, and Polestars. I mean, there's very big, diverse car market out there as it is. And so you know, we don't know that people are just buying Rivian, maybe they're buying all these stocks, right? Because the bet is not just that one of them is going to have the most successful technology, it's that the market is going to fundamentally shift in the coming decade, decades, whatever it may be. I don't know, what do you think, Sozz?

BRIAN SOZZI: Julie, we should debut an electric boat SPAC with these rising sea levels. And it's not a far-fetched idea, not a far-fetched idea.

JULIE HYMAN: Aren't there-- are there electric boats? I think there are electric boats?

BRIAN SOZZI: Well, that's our job to figure it out.

JULIE HYMAN: I guess so. I should know. We should know that already. I should know that already. All right.