Elon Musk's Tesla has seen an epic rally - here's how it all played out
- In August 2018, Tesla CEO Elon Musk tweeted that he had secured funding to take Tesla private, at $420 per share - a goofy reference to pot-smoking culture.
- The tweet prompted an SEC investigation and an eventual $40 million settlement by Tesla and Musk.
- Tesla didn't go private at $420. But after the stock cratered in 2019, it staged an epic year-end rally that put $420 in the past, obliterated short sellers, and gave bulls $500 per share to salivate over.
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I've been covering Tesla since 2007, and it's hard to believe that it was just a year ago that CEO Elon Musk dispatched his now-infamous $420 and "funding secured" tweet - and push to take the company private.
That decision wound up costing Tesla and Musk $40 million in an SEC settlement, plus Musk's chairmanship of the company.
But Tesla actually had bigger problems to deal with. Both 2018 and 2019 were tough, as the company struggled through production of the Model 3 sedan and worked feverishly to get a new factory up and running in China.
Somehow, it all came together in late 2019, just as Tesla revealed an absolutely bonkers vehicle, the long-awaited Cybertruck pickup.
Tesla's stock rallied and rallied and then some. By the end of the year, $420 was in the rearview mirror; by January 2020, a $500 share price was in sight.
Here's how it all happened:
On August 7, 2018, Musk was reportedly sitting in his car in Los Angeles when he tapped out the tweet heard 'round the world: "Am considering taking Tesla private at $420. Funding secured."
Tesla shares were actually riding relatively high at the time: $340. But they shot up to almost $390 after Musk's tweet, before settling at $380.
Musk's take-private plan collapsed over the next few months. Tesla shares fell to $250 and Musk would eventually face an SEC investigation into whether Musk misled investors. The settlement cost the CEO and the company $40 million, and Musk agreed to restrict his Twitter habit while also forfeiting his chairman title at Tesla.
With that catastrophe behind it, Tesla could get back to being a public company trying to hit sales targets from its Model 3 sedan.
The results of that effort paid off in the third quarter, a historically money-losing Tesla swung to a profit. Shares rallied at the end of 2018, peaking above $360.
Tesla finished 2018 on a strong note, delivering almost 250,000 vehicles, a record. Fourth-quarter earnings also showed a profit, but it was lower than expected.
The first half of 2019 was rough for Tesla bulls. The company sold a lot more vehicles and booked much higher revenue, but the losses were staggering. The stock plunged to $190 by mid-year.
The second half of 2019 saw Tesla return to profitability, and in October, an epic rally commenced. The carmaker's execution had improved significantly, and Musk's promise to bring a new factory in China online for 2020 had become a reality.
The modest momentum that Tesla shares established in October went ballistic for the last two months of the year. The stock blasted through $400 and then $420 by Christmas, and in the first weeks of January, $500 was in sight, with fourth-quarter earnings to come as a fresh dose of rocket fuel.
The insane Tesla Cybertruck had also arrived, proving that Tesla was still able to blow minds with its visionary vehicles.
Short-sellers had enjoyed high times in 2019, but they were crushed as the year closed out. With anywhere from a third to a fifth of Tesla's total share float shorted, frantic covering propelled the rally to new levels.
There were two big takeaways from Tesla's wild 2018 and 2019 stock-market adventure.
The first was that Tesla investing isn't for the weak of knee. An ill-considered tweet from Musk and assorted growing pains on the manufacturing side cost bulls billions of dollars.
The second is that in the auto industry, there is no magic formula. If you can build and sell vehicles on schedule and with discipline, revenue and profits should follow.
Then you can move to scaling up, as Tesla now has in China, and begin to capture unmet demand.
That's how Tesla got from a $420 tweet in August 2018 to a stock price much higher than that today, posting a 2,000% gain since 2010.
In retrospect, maybe Musk's idea of going private wasn't so great! Better luck next time, Elon.
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