Elon Musk, CEO of Tesla Motors (TSLA) has not been shy about answering the financial media’s questions about the company’s stock price. While he is usually a bit cagey on the topic, he usually says enough to cause a little stir.
Back in late August 2013, Elon Musk stated in an interview with CNBC that the valuation of TSLA stock was “more than they have any right to deserve”. The stock has since rallied more than $100 points, or about 65%.
Interestingly, investors didn’t seem to care much at the time, and the stock rallied about about 23% in the 6 weeks following until the stock ended up making an interim top with reports of fires starting in the under-carriage of the electric cars:
And then again in October 2013, Musk echoed the earlier comments to Bloomberg., “The stock price that we have is more than we have any right to deserve”.
From that comment on Oct 24, 2013, the stock did actually decline, almost 35% to its lows in late November:
The stock has more than doubled from the November 2013 lows, but again last night, comments from Musk to CNBC causing some volatility in the stock today:
“I do think people sometimes get carried away with our stock, honestly. Cause I think our stock price is kind of high right now to be totally honest. Or rather, let me put it this way; if you care about the long term of Tesla, I think the stock is a good price. If you look about the short term, it’s less clear,”
Watch here (2 minutes 15 seconds in):
The stock is down 4.25% today, in what appears to be the reaction to Musk’s comments. Looking at the one year chart below, I would suspect that the stock retraces back to the breakout level at $265 (red line below) and the stock’s ability to hold that level could be a sort of moment of truth:
I would make one other point, if Elon Musk thinks the stock is near term expensive, is the company considering another secondary offering to raise cash for what is sure to be an increasingly expensive build-out of their future plans? The table below from Bloomberg shows the company’s initial public offering of 15.3 million shares of stock at $17 on June 28th, 2010, and the subsequent secondary offerings in every year since. Will there be one in 2014??
It will be interesting to see if the company does bring a secondary what sort of demand they will have, as I would imagine that Elon Musk will NOT be participating in this one as he did as a BUYER in May 2013, to the tune of almost $100 million! Would Musk turn seller with the stock up almost 200% since his last buy?? If I secondary were to come in the coming months it would be the ultimate test of near term sentiment.
Oh and lastly for those who are long and strong, implied volatility, the price of options is just a few points off of the all time lows, and half of what it was just 5 months ago. Take away here is that stock replacement strategies, or those looking to employ options to protect gains are attractive!