By on August 20, 2018

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.

[Image: Tesla]

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22 Comments on “If Tesla’s Stock Was a Roller Coaster…...”

  • avatar

    The correct beginning of this headline should read, “If Tesla’s Stock Were a Roller Coaster . . . .”

  • avatar
    Carroll Prescott

    Tesla stock is not worth more than the price of a big mac. It should be there and not going up and down.

  • avatar

    The challenge to Tesla is to convert the strength of its market capitalization into working capital so the company can survive a fairly lengthy period of negative cash flows. It seems inevitable that that will mean deflating an inflated valuation to some degree regardless. I would suggest that the best of imperfect alternatives would be to issue stock options to current shareholders, giving them the right to buy more shares at a reduced price. That lets the true believers inject equity into the company without being diluted, and because the options will have some value, the value of the options supports the value of the shares. It could be a staged rights offering with multiple levels of funding.

  • avatar

    Musk is a shit of a person. He is like Trump in throwing out distractions when things go bad: Tunnels! Flame Throwers!. He either broke the law or committed a severe ethical violation announcing going private when there was no deal in place.

    If he is working 120 hours/week then his productivity is guaranteed to be shit, too. If you read the book “Why We Sleep” you will see that getting less that 8 hours/day leads to bad health and bad decision-making, and at the same time don’t believe you are impaired. The Tesla board needs to make him go home. If he can’t delegate the work to others then he is also a shit leader.

  • avatar
    SCE to AUX

    The latest TSLA price gets a lot of press around here. I think we’ve established that it’s a wild ride for short-term investors. Over a 5-year window, the latest changes are just noise.

    If you want stability, buy GM.
    If you want a stinker, buy F.
    If you want potential, buy TSLA.

    FCAU has dropped 30% since May 31, but that’s not as interesting as TSLA.

    • 0 avatar

      I suppose going belly up and losing billions is considered potential….but why would anyone want to invest in that?

      • 0 avatar
        SCE to AUX

        If you want a sure thing, buy bonds. They’re backed by the full faith and security of the US government.

        • 0 avatar

          “They’re backed by the full faith and security of the US government.”

          Well, there seems to be more dysfunction, incompetence, dishonesty, and outright malevolence in the “US government” now than I ever remember seeing at any point in my life (age 45), so that’s really not much more reassuring than Musk’s bloviating dog and pony shows!

          (If that post was intended as sarcasm, I apologize for being too dense to perceive it but agree 100%.)

    • 0 avatar

      “FCAU has dropped 30% since May 31, but that’s not as interesting as TSLA.”

      Gee, maybe because FCA was never as ridiculously over-valued as TSLA? Maybe?

  • avatar

    Tesla’s up and downs is interesting because Elon is who he is and does what he does. It is more interesting than FCA, because it’s not about the stock value- it’s about how the stock value ties into the personality of one man who appears to be on the edge of crisis.

    • 0 avatar

      For sure. This guy’s daily life blows any reality show out of the water.
      Now the reports that he and “Grimes” are on the rocks.

    • 0 avatar
      Prove your humanity: 9 + 8 =

      I wonder who uses more medications every day – Trump or Musk?
      I’m guessing Trump.
      Elon is, in my opinion, manic, but in a good way, most of the time. He’s larger than life in a forward-thinking, constructive way (with the exception of remarrying his ex-wife.)

      • 0 avatar

        Trumps mission is simple – destroy ineffective and corrupt system in DC to build new modern one by the next generation. Like Huns destroyed corrupted Roman Empire with slavery based economy and never ending wars so new Western European nation state concept could arise from ashes with modern capitalist economy based on science and free labor.

  • avatar
    Land Ark

    I’ve mentioned before that I own TSLA stock. Only a couple shares, so it’s not like my retirement is depending on it. But I wish I had held onto the shares I bought in 2012. I sold them for a loss when it dipped about $5/share below what I bought it for and seemed like it would never recover. Whoops. I bought in again in early 2016 after getting tired of seeing it going up without me. Since then, I’ve been pretty happy. This current stint is hopefully just wading through some of the nonsense it’s gone through a few times before.

    I bought the stock for purely financial reasons, not because of Musk. And while I admire him for what he’s been able to accomplish, he does a lot of things you might expect a “normal” guy would do if they found themselves in charge of major companies with immense power to influence – meaning make tons of mistakes and say things one shouldn’t. That’s not ideal for the profitability or long term success in this day and age. In the 1990s, yup, but no more.

    I dig his girlfriend though.

  • avatar

    Thats how you make money: buy low, sell high, repeat.

  • avatar
    healthy skeptic

    Fanboy or hater, if you want to play with Tesla stock, don’t buy or short the stock…use options! This is what options were made for.

    If you want to bet against Tesla, do NOT short the stock (sky-high capital/margin requirements, possibility of unlimited losses). Instead, buy some put options on TSLA that expire in a few months. If the stock fails to fall by then, worst-case scenario is you lose some money with nothing to show for it. But if it collapses in that timeframe, you can make many multiples of you original outlay.

    BTW, I’m not a Tesla hater at all. I actually really like their cars. I’m probably one of the few TTAC-ers left with a Model 3 res still standing. But I wouldn’t touch the stock itself with a 10-foot pole. Not only is the company is valued above GM or Ford, but stock is being driven almost entirely by speculation at this point, plunging up and down like a ship at sea. Place yer bets! (Using options, please.)

  • avatar

    Tesla is the Enron of this generation.

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