Tesla major shareholder Baillie Gifford cuts TSLA stake in ‘enforced’ reduction

Filings with the Securities and Exchange Commission have revealed that Edinburgh-based investment house Baillie Gifford, one of Tesla’s (NASDAQ:TSLA) largest institutional investors, has cut its stake in the company by 5% at the end of August. According to the investment firm, what transpired was an “enforced” reduction due to the sharp spike that TSLA stock experienced in recent months. 

In a statement to Herald Scotland, the Scottish financial firm clarified that it remains a “strong supporter” of Tesla and its efforts to accelerate the adoption of sustainable energy in the automotive and utility sector. The firm also noted that its recent SEC filing was a required step following its reduction of TSLA shares. 

“Baillie Gifford’s shareholding in Tesla has dropped below five per cent at the end of August, therefore it is required to disclose this information to the U.S. Securities and Exchange Commission (SEC). It submitted this filing earlier today,” the firm stated. 

As explained by former Goldman Sachs CIO Gary Black, the enforced reduction in Baillie Gifford’s TSLA stake reflects client guidelines that no stock could be more than a certain percentage of client’s portfolios, usually 10%. In the case of Scottish Mortgage Investment Trust, which is managed by Baillie Gifford partner James Anderson, TSLA had already grown to over 13% of the fund at the end of July. That was before the electric car maker’s shares experienced a meteoric rise following the announcement of its 5-for-1 stock split. 

While such news may be interpreted by Tesla critics as a sign that the company’s biggest institutional investors are losing faith in the electric car maker, Anderson noted that this is not the case. On the contrary, the reduction of Baillie Gifford’s TSLA stake happened because TSLA stock performed exceptionally well. In a statement to the Herald, Anderson also highlighted that in the event that TSLA stock dips, the firm will be ready to increase its stake at Tesla once more. 

“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. However, we intend to remain significant shareholders for many years ahead. We remain very optimistic about the future of the company. Tesla no longer faces any difficulty in raising capital at scale from outside sources but should there be serious setbacks in the share price we would welcome the opportunity to once again increase our shareholding,” Anderson said. 

Ultimately, Anderson noted that Baillie Gifford considers itself fortunate to have supported Tesla during a critical point in the company’s growth. Anderson also stated that Baillie Gifford is grateful for Tesla and its continued efforts to push innovative sustainable solutions, which should contribute to the battle against a potential climate disaster. 

“We are privileged to have been Tesla’s largest external shareholder over a critical period for the development of the company. We are immensely grateful for the extraordinary efforts and achievements of Tesla in driving forward a transportation and energy revolution in the face of persistent skepticism and often downright hostility. Without Tesla’s efforts the possibility of averting climate disaster would have been significantly reduced,” Anderson noted. 

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

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