In 2003, Tesla Inc., formerly known as Tesla Motors until 2017, was founded by two American entrepreneurs, Marc Tarpenning and Martin Eberhard. At the time, the company was named after legendary inventor Nikola Tesla. The pair planned to design and build electric sports cars, producing the ground-breaking Roadster sedan in 2008. The initial funding for Tesla came from a range of sources, with the most notable being from PayPal co-founder Elon Musk, who put over $30 million into the venture and served as the company’s chairman from 2004.
Towards the end of 2007, Eberhard stepped down from his post as CEO and President of Technology to join the company’s advisory board. In 2008, it was officially announced that he had left Tesla, but remained a shareholder. In the next year, Tarpenning, who served as the Vice President of Electrical Engineering, and who played a major role in the development of the Roadster’s software and electronic systems, also left the company. Following their departures, Musk took over the reins as CEO.
As mentioned, Tesla Motors unveiled its first car in 2008, the fully electric-powered Roadster. The car was one of a kind, as it was the first completely electric vehicle to offer comparable power and range to petrol-powered cars. In 2012, Tesla halted production of the Roadster so that it could concentrate on building the new Model S, a sedan that received acclaim for its design and performance characteristics. Tesla Autopilot, a type of semi-autonomous driving, was introduced on the Model S in 2014. In 2015, the company released its Model X, which is a crossover vehicle that has SUV characteristics but is built on the chassis of a car. Also starting in 2012, the company set up free-of-charge, fast charging facilities for Tesla owners in the U.S. and Europe and named them Superchargers. Later versions also had the capability to replace the Model S’ battery array and are called Tesla Stations.
In 2018, the company also made forays into the production of solar energy products and batteries. In 2016, it cemented its commitment to this space by acquiring SolarCity, a firm that manufactures solar panels. To reflect that it no longer sold only cars, Tesla Motors was renamed Tesla Inc. in 2017.
On January 29, 2010, the company filed a preliminary prospectus with the U.S. Securities and Exchange Commission, indicating that it intended to hold an initial public offering which would be underwritten by Deutsche Bank Securities, Goldman Sachs, J.P. Morgan and Morgan Stanley. In May of that same year, Tesla announced a “strategic partnership” with Toyota, which would purchase Tesla common stock worth $50 million in a private placement, immediately following the IPO.
The Tesla IPO was launched on June 29, 2010, listing on the NASDAQ exchange under the ticker TSLA. The company issued 13,300,000 shares to the public at $17 per share, raising $226 million. Tesla was the first American car manufacturer to go public since Ford Motor Company’s 1956 IPO. By 2014, Tesla’s market value was half that of Ford. While Tesla has rapidly taken off as a stock and has gained such an impressive market cap, its inconsistent car sales numbers have often negatively influenced the company’s share price. Tesla investor’s confidence constantly fluctuates on the back of each quarterly earnings report, product announcement, product delay, news event and, of course, every tweet or TV interview by Musk.
Most of the car manufacturing industry stocks generally move slowly and predictably in alignment to long business cycles. On the other hand, Tesla stock is highly volatile, with its Silicon Valley tech-like behaviour constantly baffling investors and producing opportunities for speculative stock trading. By June 2018, Elon Musk reportedly held 33.7 million Tesla shares, owned indirectly via a trust. As a result, he is the company’s largest shareholder among both individuals and institutions. He is a controversial yet brilliant man, whose actions often have a profound positive or negative impact on the stock price of Tesla Inc. For instance, in September 2018, he was blamed for a dip in the value of Tesla stock after he smoked marijuana during an interview on live TV.
Tesla has given no indication so far that it intends to pay its shareholders any dividends. However, it is important to note that this is not unique to the company. Many public companies only start paying out dividends to stakeholders after continued profitability, over an extended period of time.
Tesla is a highly volatile stock whose wild and sudden swings in price should provide plenty of opportunity for short-term and medium-term investors to benefit from. What are some of the factors that influence these movements in Tesla’s share price?
Tesla is best known for its line of electric cars, but it is also heavily involved in the design, manufacture and sales of energy storage systems as well as solar systems. Tesla’s stock remained in a range of $20-40 in its first years of trade, then jumped to a $200-400 range from 2013 through 2019 before breaking out to the upside, reaching $1,000 in June 2020. The stock is known to be extremely volatile, in part because of the unreliable financial results from Tesla, but also in part due to the outspoken and sometimes contentious nature of founder and CEO Elon Musk. In some ways Tesla trades as much on what Mush says and does as on the fundamentals of the company.
Tesla has continued to struggle to deliver good earnings on a consistent basis, but the stock doesn’t really trade on its fundamentals. This has made Tesla an excellent stock for traders who have the patience to wait for proper pullbacks when they have the chance to buy the stock “on sale” so to speak. The stock also does well on breakout moves, and has proven itself quite profitable in these situations.
As an extremely volatile stock, Tesla had both a daily gain of 19.9% and a daily loss of 17.2% in the first half of 2020, and saw its stock move more than 1% in over 75% of the trading sessions. This volatility can be good for traders, but they need a way to harness it if they want to be profitable. Because Tesla’s moves are so strong one short-term strategy for day traders and scalpers is to use the prior day’s highs and lows as entry and exit points. For example buying as price moves above the prior session high, but placing a stop at the prior session low can work well for volatile stocks like Tesla.
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