Not long ago, Elon Musk was making fun of short-sellers — investors who bet a company's stock will decline.
"Stormy weather in Shortville" he tweeted April 3 as stock prices at his electric car company, Tesla, continued its steep skyward climb.
Since June 23, when shares hit a record high of $383.45 and then nosedived, Musk hasn’t said a word about short-sellers or the company’s valuation.
On Thursday, Tesla closed at $308.83, down 5.58% for the day and down nearly 20% from the historic high two weeks ago. Off and on, Tesla had surpassed General Motors as America’s most valuable car company.
It was supposed to be a good week for Tesla. On Sunday night, Musk tweeted that production of the make-or-break new midmarket car, the Model 3, would begin in July as promised.
But news soon turned grim. Sales figures released Monday showed deliveries of its Model S and Model X luxury cars for the year's second quarter fell to 22,000 cars, about 12% short of the previous quarter, marking four straight quarters of flat or falling sales. Tesla indicated that declining demand is not the problem. Rather, the company blamed battery factory production problems.
For some investors, planned production levels of the Model 3 were not as high as they had hoped. Musk said the company will deliver 30 cars by the end of July, ramping up to 100 cars in August, 150 in September and 20,000 a month by December, or a rate of 240,000 a year.
“It’s a cliche, to buy the rumor and sell the news,” said David Whiston, analyst at Morningstar Research. But with Model 3 production underway, “some investors are saying it’s time for me to get out,” he said.
Musk's goal is to manufacture 500,000 cars in 2018, about the same number of cars that Volvo now sells worldwide each year.
Volvo itself added to investor anxiety Wednesday, when the Chinese-owned company said all its cars would be hybrids or all-electric starting in 2019, including five new pure electric models. The announcement added portent to the upcoming onslaught of electric car competitors, including luxury models coming out starting next year from Jaguar, Audi, Porsche, Mercedes-Benz, BMW and others.
Then on Thursday, the Insurance Institute for Highway Safety downgraded Tesla’s Model S from the top spot on its safety list. Because of a seat belt issue, a crash in a Model S, the safety group said, could smack the driver’s head against the steering wheel despite the electric car company’s effort to fix the problem.
It’s impossible to say how much or even whether that news drove down Tesla’s stock price, but it was a public relations hit for a company whose website advertises “The Safest Cars Ever” and which recently won a five-star safety rating from the National Highway and Traffic Safety Administration for the Model X SUV.
“Our view is that to be considered a top-tier performer, a vehicle should earn the highest safety ratings across the board in IIHS tests as well as those conducted by the federal government,” Russ Radar, senior vice president of IIHS communications, said in an email.
Tesla pushed back against the report, assailing IIHS’ credibility.
"While IIHS and dozens of other private industry groups around the world have methods and motivations that suit their own subjective purposes, the most objective and accurate independent testing of vehicle safety is currently done by the U.S. government, which found Model S and Model X to be the two cars with the lowest probability of injury of any cars that it has ever tested, making them the safest cars in history,” a Tesla spokesperson said in an email.
Some analysts and investors say the latest news doesn’t change the company’s long-term prospects.
“I don’t see a whole lot of change [in fundamentals] between a week ago and today,” said stock analyst Efraim Levy of CFRA Research. “The stock has been ahead of itself for a long time.” Even now, Tesla stock is up 42% year to date.
Mark Spiegel, a short-seller and longtime Tesla bear who heads hedge fund firm Stanphyl Capital, said that “what's driving Tesla down now are the exact same things that short-sellers have been talking about for months and years.” The company can’t make money on the Model 3, he insists, and believes the company’s true stock value is “zero.”
Levy doesn’t go near that far, though he maintains a sell rating on the stock.
“I’m not ready to count them out,” he said. “They often miss their deadlines and then catch up. Next week the stock could go back up.”
Times staff writer Alexa D’Angelo contributed to this report.