Tesla Shares Plunge Amid Crash In Oil Prices, China Virus Risks
Stocks soar despite coronavirus and a recession. The company's stock crash would not be a mere Wall Street adjustment; a hard landing is a foregone conclusion. Remember when Elon Musk said he was fielding offers to take Tesla Inc. Investors that betted against Tesla's stock are now helping to drive it far higher.
Last week's earnings show the company has now posted a small profit for two quarters in a row, which is causing some investors to think the hyped-up company is finally starting to live up to its promise. That story may well be true, but while technology may be favouring Tesla, the share price performance could tell a different story later on.
So-called short sellers are investors who make money by betting against companies they think are poised to go down in value, and almost 18 per cent of Tesla shares right now are in the hands of short sellers — more than any other U.S. company, according to research firm S3 Partners.
Became the most highly valued automobile manufacturer in U.S. history A nearly fourfold increase since July brought its stock to $471, carrying its market cap ( $85 billion ) far beyond those of General Motors ( $50 billion ) and Ford ( $37 billion ). Since then, Tesla has surged past Volkswagen AG to trail only Toyota as the world's most highly valued automaker.
Data, institutional investors hold 74% of all Tesla shares available to the public. And of course, such a well-informed investor would have also included that risk in the price when they purchased the Tesla stock. On the other hand, EVs are gaining popularity as prices for the expensive batteries in them have declined more than 70% over the last decade, thus the prices of the cars themselves.
A short-seller who borrowed a Tesla share, sold it at $300, and then bought it back at $200, would make a $100 gain (not counting the costs of the trade), for example. Interestingly, Tesla CEO Elon Musk himself had said the company's share price was too high.
And some do reconnaissance, posting photos and videos of Tesla storage lots, distribution centres, even the company's Fremont assembly plant as seen from above. It wasn't, and by August 20, as reality Elon Musk sank in, Tesla shares were down almost $US100 a share, or 25 per cent from pre-tweet levels.