Tesla, the WTF Chart of the Year

You’ve got to admire Musk for snookering true believers into buying $2 billion of new shares a month ago that are now down 52%.

By Wolf Richter for WOLF STREET:

First a little history. Back in the good old days of February 4, 2020, when Tesla CEO Elon Musk could still be seen walking on water, and when Tesla’s shares hit $960 (and a little later $968.99), I posted a chart, calling it the “WTF chart of the year,” and adding that I’m in Awe of How Tesla is Now a Supernatural Phenomenon:

Parallel to the stock-price chart above, Tesla’s market cap skyrocketed by 168% and by over $110 billion in about two months. Which was of course ludicrous. But what was even more ludicrous — well, outright hilarious — was the stuff that analysts and true-believers put out there rationalizing this spike, explaining with logical-sounding gobbledygook why this type of nutty price surge was normal and appropriate for Tesla, given that its CEO walks on water or whatever.

Today, Tesla shares plunged 16% to $361.22, amid allegations that the company was flouting the lockdown order of Alameda County, one of the five San Francisco Bay Area counties that imposed a lockdown on nonessential businesses on Tuesday – that it was running its full two shifts, packing thousands of people together, including in dense lines at the doors of dozens of shuttle buses and other locations, and cranking out cars despite the County’s order to shut down.

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The price of $361.22 is significant in the grander scheme. Tesla is now back where it had first been in June 2017. So this is my updated “WTF chart of the year,” a phenomenal nearly symmetrical spike, similar to an old rusty railroad spike:

In terms of a company with tens of billions of dollars in market cap, such as Tesla, this type of near-perfect three-month spike that went down slightly faster than up, and where the value of a company exploded by 168% — and by $110 billion — and then collapsed, may be unique in US history.

Penny stocks, scam stocks, or little-known stocks with tickers that get confused with some hot stock, can get this type of percentage spike, but those spikes don’t every create $110 billion in market cap in a few weeks, only to then unceremoniously unwind that $110 billion in market cap even faster.

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Nevertheless, you’ve got to admire Tesla, or rather Musk, for snookering true-believer investors. These folks had it coming. Musk, still walking on water, snookered them gloriously into buying over $2 billion of new shares that Tesla issued on the way down of the spike, on February 13, for $767 a share.

Tesla needs the money. It is using the $2 billion to fuel its cash-burn machine. And the investors are sitting on a one-month loss of 53%.

But this WTF chart shows just how crazy the stock market was in early February, how euphoria-besotted stock-jockeys and spaghetti-code algos would do anything, no matter what, as long as it was buy, buy, buy.

This kind of spike shows that the market overall had gone nuts, that reality would eventually exert itself again at least a tiny little bit, and that the whole house of cards was utterly ripe for an implosion.

And that’s what we got with Tesla, and with the stock market overall. Even now, Tesla is still overvalued by a huge amount. And reality is still far away, but getting rid of that spike was a good first step in the right direction.