If Tesla's Stock Was a Roller Coaster…
The correct ending to this headline should read “…We’d All Lose Our Lunch.” Especially this month.
Tesla investors are taking a wild ride of late, with CEO Elon Musk’s Aug. 7th “secured funding” tweet and subsequent stock spike giving way to a hands-in-the-air plunge as the funding for his go-private plan remains on the missing persons list. Couple that with a very concerning New York Times interview and increasing skepticism from analysts, and you’ve got the makings of a standout attraction at Six Flags.
While the company’s stock has almost rebounded to the previous close, Tesla shares dropped 5.7 percent at the start of trading Monday. Since end of day Aug. 7th, Tesla shares have fallen 20.4 percent. And that’s after they rose 26 percent over the first week of August, to the highest point in nearly a year.
Fueling that steep climb was an Aug. 2nd earnings call where Musk apologized to analysts snubbed in an earlier call, and more or less came across as a measured, level-headed chief executive with a company on the verge of making money. Then came his tweets (and later blog post) detailing how he planned to take the publicly traded Tesla private at the eyebrow-raising price of $420 a share. Such a buyout would take tens of billions.
Things fell apart when the “secured funding” turned out to be a series of meetings and a good feeling that Saudi Arabia’s sovereign wealth fund might pony up the dough to see the deal through. Over the past week, that scenario began appearing increasingly unlikely.
In his NYT interview, Musk admitted to sending the unapproved tweet, which was never vetted by the company’s board, from his car while on the way to work. The conversation illustrated Musk’s dependence on the sleep drug Ambien — a drug with a notorious side effect of impulsive and erratic behaviour. Sunday brought another shocker. A Reuters report claimed the very same fund courted by Musk might be on the verge of investing heavily in a Bay-area electric car startup — but not Tesla.
According to Bloomberg, JP Morgan analyst Ryan Brinkman told clients that a deal with the Saudis is “potentially far from even being formally proposed.” Brinkman dropped his price target for Tesla from $308 per share immediately after Musk’s now-infamous tweet to $195 (the same price as before).
“We now believe that such a process appears much less developed than we had earlier presumed,” he wrote.
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