Tesla overturns belief in Elon Musk’s ‘business miracle’


As Tesla’s share price was higher than the previous week, David Baird saw more than $ 1m away from the value of his positions, reducing his stake to almost half.

The pullback was an ordeal for an army of small investors who have piled into the stock of an electric car manufacturer, helping to make it one of the world’s most valuable publicly traded companies. A 54-year-old freelance IT manager like Mr. Baird, the latest slide in Tesla’s shares – in which he shed nearly $ 120 billion of market capitalization – was painful. But it has not yet given any reason to cash out.

“I’m constantly bombarded by people who think they know better, asking me to sell them in the last five years – that’s why I’m up,” said Mr Baird, who worked in Brussels And lives from Shrewsbury in the UK’s West Midlands. He reduced his paper loss of $ 1.2m on his Tesla stock and derivatives, reducing his holding to $ 1.5m. “Once you run Tesla, you should have one.” It burns you It eats you inside. ”

For some, Tesla has become a market symbol that moves at its own pace with little time for the health of the economy or the profits generated by companies. The stock’s rise has been prompted by retail buyers, who traded a large number of options to divest the company, helping the stock run even higher.

Price moves have been volatile and, at times, difficult to explain. But starry-eyed investors point to the company’s ability to dramatically increase production of electric vehicles. Some have quit their day jobs to work with carmakers, while others have pledged their savings accounts to their shares.

Several people who spoke to the Financial Times said that they remained in the company despite a record one-day decline in stock of 21 percent on Monday. Even after its recent fall, Tesla’s equity is nearly four times the sum of General Motors, Ford and Fiat Chrysler.

“This is not an equity price miracle or the market is irrational. This is one of the biggest business miracles ever in the market, ”said investor Galileo Russell, who runs a popular Tesco podcast. On the company’s earnings call two years ago, chief executive Elon Musk gave him time to ask a question – the most companies reserved for professional analysts.

The small investors’ unwavering allegiance to Mr. Musk and the company he built characterized the stock’s rise. According to RBC Capital Markets strategist Amy Wu Silverman, compared to companies such as Apple and Amazon, whose shareholder registers are dominated by large asset managers and index funds, Tesla has been taken over by people like Mr. Russell and Mr. Beard. .

“The shares have huge retail sales and when this is true, it becomes less about numbers and more about vision,” she said. Retail investors are “buying into the idea that this is the future and it falls short about what it means from a valuation standpoint.”

Nevertheless, some shareholders tried to justify the sharp move in Tesla’s stock price, as it blew past targets set by investment banks on Wall Street. And it has been a struggle sometimes.

Line chart of weekly contract volume (millions) * showing that Tesla investors have loaded on options

For example, for weeks in June and July, investors were sure that the company would report fourth consecutive quarterly profits and thus enter the elite S&P 500 index. In late July, when the company revealed that it had beaten those expectations, its shares still fell for two straight days.

Tesla closed the stock again in August after the stock split was announced – confusing professional analysts, who argued that such a move should have no effect on the company’s valuation. Some investors cited the possibility of the S&P 500 entering and a promising announcement on battery technology. Its shares slipped when it was revealed in early September that Tesla had been moved to the latest S&P reshuffle.

“Tesla has always struck me as a faith-based stock,” said Steve Sosnick, chief investment strategist at Interactive Brokers. “There are people who believe in Elon Musk and company that they speculate on the downside, because they are on the downside.”

Despite a partial recovery in recent times, the shares were down nearly a quarter from their record highs of the previous month. Fanatical supporters are fearless.

© Ellie Burton

Eric Burton, a Tesla shareholder in Sacramento, quit his job as a vice president for a software company and devoted his time to a comic book, which includes Mr. Musk. The three versions so far were based on the mannequin exploded in space two years ago at the Tesla Roadster.

Mr Burton said he believed Mr Musk was a “super genius” and that Wall Street professionals had failed to understand the influence beyond Tesla’s vehicles. “Institutions see it as a vehicle manufacturer, but it makes no sense,” he said. “As a disruptive tech company, it is different.”

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