Why Tesla, a once-popular short, powered up stock exchange – Wall Street Journal

Tesla has come a long way since its inception in 2003, and with its growth we've seen Musk's eccentric personality bring rapid peaks and troughs to stock prices. In 2018, Musk tweeted he was going to take Tesla private at $420 per share. The tweet got him in trouble with regulators, which said it was a reference to marijuana culture. Now the most valuable car manufacturer in the world, Tesla's fundamentals don't explain the rise, with runner-up Toyota selling almost 25 times as many vehicles. The Wall Street Journal looks at the Tesla share price trajectory. – Nadim Nyker.Read also: Tesla seeks tax break for new plant as stocks hit all-time high.Gunjan Banerji, WSJ Markets Reporter: I don't think any other stock has captivated investors on Wall Street or Main Street the way Tesla has. It's just become one of the most controversial names and one of the most watched names out there..___STEADY_PAYWALL___.WSJ narrator: This summer, Tesla became the most valuable auto company in the world, surpassing Toyota and claiming a market cap of over $190-billion before continuing its climb..News report: The electric vehicle maker stock speeding this year most..News report: Musk's wealth skyrocketing, thanks to a surge in Tesla shares, making him wealthier than Warren Buffett..WSJ narrator: But the company's fundamentals don't seem to explain the rise. For example, Toyota sold almost 25 times as many vehicles as Tesla did last year. Instead, the rally has been driven by investor enthusiasm for CEO Elon Musk and a belief by some that in the future, cars everywhere will be powered by batteries, not gasoline..A hopeful tweet.WSJ narrator: Here's how Tesla became the most valuable automaker in the world. Tesla developed its first car in the early 2000s, but to follow its ballooning share price, a good place to start is last fall..Gunjan Banerji: In October 2019, Tesla reported a surprise profit for its latest quarter, and that just sent its shares soaring. Just a few months prior, Tesla shares were hovering near three-year low. The prior year, Elon Musk had tweeted that he was going to take Tesla private at $420 a share, and that landed him in the crosshairs of regulators. He'd also kind of had a history of missing financial targets and car delivery targets. So that's why the surprise earnings was really a big deal..WSJ narrator: Amid the rush of investor optimism in mid-November, Musk held an event in Los Angeles to reveal Tesla's Cyber Truck..Gunjan Banerji: What he did was he unveiled this pickup truck that looked unlike any other pickup truck we had ever seen before. And he boasted that it was really, really durable..WSJ narrator: At the event, a Tesla employee through a metal ball at the window to show its strength, but ended up breaking the glass..Elon Musk: Also, we're going to be offering rides in this all night. Don't mind the glass..WSJ narrator: The next day, shares fell more than 6%. But amid press around the event, the stock quickly recovered. And on 23 December 2019, it surged past $420..Gunjan Banerji: The reason that 420 mark is a kind of milestone is that, you know, that was kind of the tweet that landed Musk in the crosshairs of regulators..WSJ narrator: The S.E.C. later said the tweet was a reference to marijuana culture that Musk used to amuse his girlfriend..Gunjan Banerji: The shares crossing 420 later in the year. It was kind of a victory in that sense..How Tesla rose to the top.WSJ narrator: In the following weeks. Tesla had a string of wins. The company said it met its delivery goal of 360,000 cars for the year. And less than a year after breaking ground at its China plant, the carmaker met its objective for Model 3 production at the facility and held a press conference to celebrate deliveries of China-made Model 3s to Chinese customers..Gunjan Banerji: Many people viewed China as the world's biggest market for electric vehicles. So in order for Tesla to kind of make this journey from, you know, just a small start-up to a global behemoth producing electric cars, bullish investors say that it needs to target that market. So this boosted expectations for the coming year..WSJ narrator: The investor momentum continued when, on 29 January 2020, Tesla posted a profit for the second quarter in a row. On the earnings call, the company said it was well on its way to producing its next car. The Model Y compact sport utility vehicle. And it told investors the business should be profitable going forward..Gunjan Banerji: So this was around the time that Tesla shares really just started to go parabolic. And you saw Wall Street investors, Main Street investors, kind of all piling in to Tesla shares, Tesla options. And it just kind of became this huge frenzy around the company..Tesla one of the most popular shorts.WSJ narrator: But not everyone was betting for the car company..Gunjan Banerji: The fascinating thing about Tesla is that despite its kind of meteoric rise in the stock market this year, it remains one of the most popular shorts. So that means it's a really popular bet for investors who think that the shares are going to absolutely plummet. When the stock goes up, that's painful for a short investor. That means that they're losing money. So some people can't hold onto these money losing positions for too long. So they have to close out their position. And sometimes they do that by buying Tesla's stock. In this kind of unusual twist, you have investors who think the shares are going to go down actually helping to drive it up..WSJ narrator: But the stock run up was stopped short in March 2020. Despite investor enthusiasm, tussle was not immune to the market effects of the corona virus. Lockdown's that month, California issued stay at home orders leading Tesla to suspend production at a factory and interrupting the company's ramp up for its newest vehicle. The stock fell in March and then quickly bounced back as the market started to recover. At the heart of this downturn, the Federal Reserve enacted a massive stimulus plan to buoy the economy, fueling a broader recovery in the stock market. That also lifted stocks like Tesla. On 29 April, Tesla reported another profit, the third in a row..Joining the S&P 500.Gunjan Banerji: Even through the low of the S&P 500, the S&P was down roughly 30 percent year to date. And meanwhile, even through that time frame, Tesla stock was up. So despite a recession, a global pandemic that could crimp demand for cars. Tesla's stock has still been resilient this year..WSJ narrator: Then on 10 June 2020, investors pushed the automaker's stock past $1000 a share for the first time ever. After much told employees it was time to begin production and the company's all electric semi-trailer truck. By July, Tesla became the world's most valuable carmaker, overtaking Toyota. And on the 2 July 2020, Musk taunted the short sellers. When shares opened above $1,200 for the first time, after Tesla deliveries beat expectations and investors anticipated the company's inclusion in the S&P 500 index..Gunjan Banerji: In order to be considered for the S&P 500, a company needs to deliver a cumulative profit over four consecutive quarters, including the most recent. So even before Tesla's most recent earnings report, a ton of investors were anticipating, "hey, we think it's gonna be profitable this quarter, we think it's going to be in the S&P 500" and that drove the stock even higher..WSJ narrator: On an earnings call on 22 July 2020, Tesla said it hit that goal, defying the Wall Street bears who expected a loss..Elon Musk: We were able to achieve a fourth consecutive profitable quarter. And although the automotive industry was down about 30 percent year-over-year in the first half of the year, we managed to grow deliveries in the first half of the year..Gunjan Banerji: If you bought 10 shares of Tesla last June, in June 2019, it would have cost you a little more than $1,700. If you held on to that investment through late July. It would have been worth more than $15,000. Bears still think the stock is going to go down. They don't think that Tesla will bring electric vehicles to the masses.

Why Tesla, a once-popular short, powered up stock exchange – Wall Street Journal

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