By Tim Higgins
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 10, 2020).
Tesla Inc.'s strong performance during the pandemic has sent its
stock soaring, dealing a blow to investors betting against the
Silicon Valley auto maker. And Chief Executive Elon Musk is having
a blast rubbing their noses in it.
The 17-year-old electric-car company's market value has risen
almost 25% -- or about $50 billion -- to more than $250 billion in
little over a week, and now roughly equals the combined values of
Toyota Motor Corp., General Motors Co., Ford Motor Co. and Fiat
Chrysler Automobiles NV. Tesla shares hit a record high $1,429.50
during Tuesday trading.
With Tesla shares more than tripling this year, short sellers --
investors who have bet against the stock -- have lost $17.89
billion on paper during the period, according to Ihor Dusaniwsky,
head of predictive analytics at S3 Partners. In July, the bearish
investors are down more than $4 billion, with shares up 2.1% on
Thursday.
A gleeful Mr. Musk has celebrated in recent days by taunting the
short sellers, announcing over the weekend the launch of a line of
Tesla "short shorts," skimpy red-satin garments that the company
said sold out quickly. Tesla's website said the shorts included the
company's model names spelling out S-3-X-Y, and Mr. Musk noted they
were selling for "only $69.420!!" -- numerical references to both a
sexual position and marijuana -- themes Mr. Musk has hit on before
on Twitter.
Tesla didn't respond to a request for comment.
The episode is the latest in Mr. Musk's long-running and
vitriolic Twitter battle with short sellers who, attracted by
Tesla's struggles and Mr. Musk's showmanship, have questioned the
fundamentals of the business and demand for electric vehicles.
The recent stock surge has reduced the short sellers' ranks to
the hardest core, said Mr. Dusaniwsky. "These losses have squeezed
out most of the less rabid short sellers, leaving only those most
dogmatic short sellers in the trade," he said Wednesday.
Short-seller interest in Tesla has fallen to less than 10% of its
stock, compared with more than 20% about a year ago.
Mr. Musk also has mocked the Securities and Exchange Commission,
a longtime target of his.
"Will send some to the Shortseller Enrichment Commission to
comfort them through these difficult times," he tweeted last week
about the shorts, reviving a term he used in 2018 after settling
with the SEC over claims that he had misled investors with tweets
saying he had secured funding to take the auto maker private.
The latest surge in Tesla's stock puts Mr. Musk closer to
unlocking a second giant payday tied to the company's performance,
including holding an average market value of $150 billion over six
months and 30 days. At Wednesday's closing price, the past
six-month average market value was $139 billion. He qualified in
May for the first of a 12-part compensation package that, in
aggregate, could potentially be worth more than $50 billion through
2028.
The initial payday had a nominal net value of more than $700
million at the time. This second tranche would be worth $1.76
billion at Thursday's closing price of $1,394.28 a share.
Longtime automotive industry analyst David Whiston said Tesla's
share-price rise reminds him of the 1990s tech bubble, except that
the auto maker is making a product that some people want.
"I just can't justify the valuation even if you want to be very
optimistic on their deliveries rising," said Mr. Whiston, an
analyst for Morningstar Research Services.
Analysts now have revised their financial forecasts for the
second quarter, due July 22. Those surveyed by FactSet, on average,
estimated on July 7 that Tesla would lose $294 million in the
period, an improvement from late May, when they predicted a $387
million loss.
Some analysts, including Brian Johnson at Barclays, think Tesla
might eke out another surprise profit. Mr. Johnson estimates a
possible $42 million profit helped by the sale of $300 million in
regulatory tax credits. Doing so would make Tesla eligible for
consideration to be included in the S&P 500 index.
By the end of December, analysts predict Tesla will turn a $258
million full-year profit -- its first -- on delivery of 435,000
vehicles, short of the more than 500,000 deliveries that Mr. Musk
targeted before the pandemic.
Mr. Johnson, who sees Tesla as overvalued, cautioned bearish
investors that he doesn't see a trigger to cause shares to fall
until near the end of the year when it becomes clear what demand
for the new Model Y compact sport-utility vehicle might be.
"We see nothing to prevent the shares moving higher in the
coming weeks and urge our bearish friends...to remain in the
shelter of their caves," he wrote.
The momentum around Tesla shares has swung drastically in the
past. A little more than a year ago, the bets that Mr. Musk's
opponents placed looked correct. Tesla's deliveries slowed early in
2019 as it struggled to export the Model 3 compact car and cash
dwindled. The stock fell to close at a low of $178.97 a share on
June 3, 2019.
Tesla shares began to surge when deliveries improved in the
second half, took a step back as the pandemic hit and reignited in
April when the company surprised Wall Street by posting a
first-quarter profit.
As excitement built ahead of the second-quarter delivery results
released on July 2, Tesla overtook Toyota last month as the world's
most valuable auto maker, when excluding the Japanese company's
sizable pool of treasury shares. The 82-year-old auto maker, which
had a $19 billion profit in the past fiscal year, is worth $176
billion, not including the shares.
Tesla ended the second quarter delivering 90,650 vehicles, down
4.9% from a year earlier, when Wall Street was braced for a 24%
drop.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
July 10, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Toyota Motor (NYSE:TM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Toyota Motor (NYSE:TM)
Historical Stock Chart
From Sep 2023 to Sep 2024