The massive drop in the value of Tesla Motors Inc (NASDAQ:TSLA) has triggered a special reaction from the NASDAQ OMX Group, Inc. (NASDAQ:NDAQ). The drop in the value of the stock early on this morning resulted in the triggering of the Nasdaq ‘circuit breaker’. Tesla stock fell to a low of $146.35 earlier today but had rebounded above $150 at time of writing.
The NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) circuit breaker is designed to curtail highly volatile movements in stocks. USA Today picked up on the triggering of the circuit breaker earlier this morning. Tesla Motors Inc (NASDAQ:TSLA) investors are still dealing with the fallout from the earnings report the company released on Tuesday, but the Nasdaq appears to have made itself comfortable with the decline.
Nasdaq circuit breaker
The circuit breaker is triggered after a loss of 7% or 13% in the value of a stock before 3:25 PM. Tesla Motors Inc (NASDAQ:TSLA) lost more than that amount this morning and trading was halted for 15 minutes as a result. If a stock falls by more than 20% the stock can be halted for half of the remainder of the day. Tesla managed to avoid that fate this morning.
Falls of this magnitude are not all that common. They usually occur when a company announces very bad news, a company’s management is found to have mislead investors in some way, or a company’s share price does not reflect the value of the company. The drop in the value of Tesla Motors Inc (NASDAQ:TSLA) is most likely due to the third of those reasons.
Tesla Motors Inc (NASDAQ:TSLA) earnings looked weak after they were released on Tuesday afternoon. The company reported lower than expected sales of its luxury Model S sedan, sending its shares into a tailspin after the market closed. That drop continued this morning and set off the exchange circuit breaker as a result.
The drop in the value of Tesla Motors Inc (NASDAQ:TSLA) has hurt a lot of investors this morning, but those betting on the company for the long run will not be fazed by this morning’s loss of value. Tesla has yet to grow into the expectations that market has set for it.
This morning’s loss of value resulted form the huge valuation of Tesla Motors Inc (NASDAQ:TSLA). Now that the expectations on the firms have been toned down, the company can get along with its work.