Tesla’s overthrow tests faith in Elon Musk’s ‘business miracle’


As Tesla’s stock price fell over the past week, David Baird saw more than $ 1 million drift away from the value of his positions, cutting his holdings by almost half.

The pullback was a test for an army of small investors who piled into the electric car maker’s stock, helping make it one of the world’s most valuable publicly traded companies. For some die-hard fans like Mr Baird, a 54-year-old independent IT manager, the latest drop in Tesla shares – in which it lost around $ 120 billion in market capitalization – was painful. But he hasn’t offered a reason to cash in yet.

“I’m constantly bombarded by people who think they know better, telling me to sell over the past five years – that’s why I’m standing,” said Mr Baird, who works in Brussels and is from Shrewsbury in the West Midlands of the United Kingdom. He ignores the $ 1.2 million paper loss on his Tesla stock and derivatives, which reduced his holdings to $ 1.5 million. “Once you’ve driven a Tesla, you’ve got to have one. It burns you. It eats you inside.

For some, Tesla has become the emblem of a market that evolves on its own without worrying about the health of the economy or the profits generated by companies. The stock’s rise was propelled by retail buyers, who also traded a large number of options related to the company, helping to push the stock further up.

Price movements have been volatile and, at times, difficult to explain. But star-eyed investors point to the company’s ability to dramatically increase production of electric vehicles. Some quit their daily jobs for work related to the automaker, while others invested their savings accounts in its stocks.

Many who spoke to the Financial Times said they remained all-in on the company, despite the stock’s record one-day drop of 21% on Monday. Even after the recent falls, Tesla’s equity is worth almost four times the sum of General Motors, Ford and Fiat Chrysler.

“This is not a stock price miracle or an irrational market. This is the market that deals with one of the greatest trading miracles of all time, ”said investor Galileo Russell, who runs a popular Tesla podcast. During the company’s earnings call two years ago, chief executive Elon Musk gave him time to ask a question – a place most companies reserve for professional analysts.

The unwavering loyalty of small investors to Mr. Musk and the company he built was a hallmark of the stock’s rise. To a greater extent than companies like Apple and Amazon, whose shareholder records are dominated by large asset managers and index funds, Tesla is influenced by people like Mr. Russell and Mr. Baird, according to Amy Wu Silverman, strategist at RBC Capital Markets.

The stocks have “a very strong retail customer base and when that is true it becomes less about numbers and more about vision,” she said. Retail investors “buy into the idea that this is the future and it becomes less important from a valuation perspective.”

Even so, some shareholders have attempted to justify the sharp swings in Tesla’s share price because they exceeded targets set by Wall Street investment banks. And it has sometimes been a struggle.

Line chart of weekly contract volume (in millions) * showing Tesla investors stocked up on options

For weeks in June and July, for example, investors were convinced that the company would bring in a fourth consecutive quarterly profit and thus enter the elite S&P 500 index. In late July, when the company revealed that it had exceeded these expectations, his shares nonetheless fell for two consecutive days.

The stock took off again in August after Tesla announced a stock split – confusing professional analysts, who argued that such a move should have no impact on the valuation of the company. Some investors have again raised the prospect of the S&P 500 admission and a promised battery technology announcement. When it emerged in early September that Tesla had been pushed back in the latest S&P reshuffle, his shares slipped.

“Tesla has always struck me as being a denominational stock,” said Steve Sosnick, chief investment strategist at Interactive Brokers. “There are people who trust Elon Musk and the company so much that they tend to be more likely to speculate on the upside than on the downside.”

Despite a partial rally in recent days, stocks remain about a quarter below their high last month. Hardcore supporters are fearless.

© Eli Burton

Eli Burton, a Tesla shareholder in Sacramento, stepped down as vice president of a software company earlier this year to focus on a comic book starring Mr. Musk. All three editions so far are based on Starman, the dummy who was blasted into space in a Tesla roadster two years ago.

Mr Burton said he believes Mr Musk is a “super genius” and that professionals on Wall Street have failed to capture Tesla’s impact beyond its vehicles. “The institutions see him as a car maker, but that doesn’t make sense,” he said. “As a disruptive tech company, it’s different.”


Please enter your comment!
Please enter your name here