Technology

Tesla shares surge again despite Saudi Arabian exit

Stock passes $900 as sovereign wealth fund discloses it sold its $2bn stake

Tesla China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai last month.

Tue Feb 4 2020 - 14:19

Tesla shares extended a vertiginous rally that has made the company the world's second-largest carmaker by market value, despite losing the backing of Saudi Arabia's giant Public Investment Fund and attracting new attention from a famous short-seller.

Up another 18 per cent by lunchtime in New York on Tuesday, hitting a record price above $920 (€833) a share, the stock has now more than doubled since the start of the year.

The rapid stock price rise continued despite the disclosure that Saudi Arabia’s $320 billion sovereign wealth fund had all but eliminated its stake in the electric car maker. The fund held stock worth just $16.4 million at the end of December, according to a Tuesday filing with the US securities regulator.

The PIF built its stake in Tesla in 2018, disclosing 8.3 million shares in the company that were worth $2.8 billion in December that year. They had slipped in value to $2 billion at the end of September last year, before it began to reduce its stake.

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Its position would now be valued at $7.7 billion if it had not been sold in the fourth quarter.

Shares in Tesla appeared on course to have their most actively traded day on record, eclipsing the 47 million that changed hands on Monday. The Tuesday figure was 40 million with more than two hours of trading to go.

The stock’s rally was accelerated last week when the company reported a $105 million profit for the fourth quarter, prompting short-sellers to rapidly claw back bearish bets.

Bill Selesky, an analyst for Argus Research, said the “crazy” stock rally reflected positive views on earnings and strong demand for the Model 3, one of the carmaker’s flagship vehicles.

“When consumers think about buying an electric vehicle they think about buying a Tesla - that is what is driving the market,” Mr Selesky said. “What will make or break Tesla stock is demand and right now it’s off the charts, especially for the Model 3.”

Dan Ives, an analyst with Wedbush Securities, said the stock could hit $1,000 if the company successfully tapped demand in China for electric vehicles. “While Tesla shares remain on a historic rally post-earnings, the bull party will probably continue in the near term,” he said.

The stock price boom has hurt investors betting against the company. Short-sellers had sustained additional losses of $2.7 billion by mid-morning on Tuesday, on top of $3.2 billion on Monday, which itself was the largest one-day loss for Tesla shorts, according to the data provider S3 Partners. The paper losses take the total for Tesla short positions to $11.6 billion since the start of the year.

Andrew Left, a widely-followed short-seller and founder of Citron Research, pointed the finger for Tuesday’s share price surge at momentum traders, computer-driven traders who buy a stock when it is quickly rising.

Mr Left, a one-time short-seller of Tesla, told the Financial Times: “I said I would never short the stock again, but now it’s not even a stock, it’s a casino situation.”

If Elon Musk, Tesla’s chief executive, “were a hedge fund manager he would short it right now”, Mr Left said.

Mark Spiegel of Stanphyl Capital, which has maintained a short position in the stock for years, said the value of his fund had dropped 9 per cent for the year because of Tesla’s rising stock price. He trimmed his bet on Monday to cap the value of the short position at less than 5 per cent of the fund.

“This is completely uncharted territory,” Mr Spiegel, who remains confident the stock price will drop, said. “At some point one of these tops will be the blow off top and then the bubble will collapse.”

Tuesday’s advance gave Tesla an enterprise value of about $170 billion and a market capitalisation of $161 billion, which makes it the world’s second-biggest carmaker by market value, just behind Japan’s Toyota at about $227 billion.

In recent weeks it has surpassed the combined market capitalisation of Detroit’s Big Three - General Motors, Ford and Fiat Chrysler - which have a combined value of $104 billion. – Copyright The Financial Times Limited 2020

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