Tesla IPO Comes Back Down To Earth After One Week Of Trading, Outlook Gloomy

Derek Kreindler
by Derek Kreindler

Most of us are probably more comfortable looking at a dyno graph than any sort of financial data, but believe it or not, the AutoGuide staff actually have interests outside of cars, and for some of us, that includes finance.

The Tesla IPO was one story that came to our attention, as it was the perfect nexus of technology, automobiles and financial markets. Tesla has gotten a lot of publicity among the IPO happy tech-crowd – the same one that was responsible for two equity bubbles this decade, but not a lot of love from the car or business community, who are skeptical of a company that has promised the moon but delivered relatively little.

As you can see from the chart, the Tesla IPO opened at $17, and rocketed up to $30.41. The stock is now worth $16.63. Seeking Alpha, another financial blog, claims that some of the up and down patterns at the very top of the graph indicate that the stock is being flipped quickly and constantly by speculators (perhaps the computerized HFT machines) looking to make a quick profit by taking advantage of the minor price differences throughout the day. This is in stark opposition to the received wisdom that eco-conscious small-time investors would buy and hold the stock due to the cachet and “green” disposition of the company.

Aside from the usual Wall St. market manipulation nonsense analysts are taking an increasingly skeptical view of Tesla Motors; the company’s product plans are hazy, the delays constant and the volumes low. The reports coming out of the media that Tesla executives are treating it like a “Silicon Valley venture” rather than a company that makes tangible products is worrisome for some, but all we can do now is sit back and track it. What’s most interesting is how Toyota will fare in this situation. It traded its NUMMI plant for $50 million in Tesla stock, and if it goes belly up, Toyota will have to eat a substantial loss.

[With files from Zero Hedge, Seeking Alpha]

Derek Kreindler
Derek Kreindler

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  • Let's not forget here that the stock IPO'd at $18.00 not $31.... speculators drove the price up to $31 (probably not deservedly) Tesla cannot be faulted for what happened - nor can it be claimed the stock "lost 50% of its value" ... in fact... its really only gone from $18 down to $16 - not a big loss, especially on a very very long-term stock. I'm not a huge fan of Tesla, but calling its existence into question over some stock speculation during a VERY difficult time for the overall market is unjust. The fact it IPO'd successfully during one of the worst periods in automotive history, and the financial markets is actually a credit to the excitement that investors have for this stock. Perhaps they got a little too excited too quickly though when they drove it up to $31 before slamming on the brakes!

  • Charles Goin Charles Goin on Jul 07, 2010

    Smart small investors like myself bought at $18, sold at $30 and are waiting for it to stablize to maximize our investment. I knew the stock would be volitale at the beginning. But I am also in it for the long haul. Everyone is comapring Tesla to GM or Ford. A much better comparison would be to BMW, Audi or Jaguar. High performance and Quality sold internationally with a cache' built on its expertise. GM doesn't sell half its vehicles overseas, same with Ford. Ford and GM import thier international designs for the US market, but not the other way around. Unlike Audi, VW, BMW, or Porsche which get a premium for having well built cars in a more niche market internationally. Telsa will never have to sell 100,000 cars a year to be profitable and be a global player. The Model S is more comparable to the Porsche Panamera which at over $100K sold 10,000 units its first 3 months. Teslas' model S needs to sell 20,000 a year to be profitable at half the cost. If Tesla focuses on a quality build, fit and finish, and reliable mechanicals. They will easily succeed if they follow the Porsche models.