Tesla Inc (NASDAQ: TSLA) has been a topic in the center of mainstream news as of late, and for good reason. Well, it’s not good for the company. Ultimately, Elon Musk, the CEO of the company is quickly losing credibility, and that loss of credibility is boiling down to declines in the value of the stock. Today, we’ll talk about:
- How Musk lost credibility and what it means for the company;
- what we’re seeing from the stock; and
- what we’ll be watching for with regard to TSLA ahead.
Why Elon Musk Is Losing Credibility And What It Means For TSLA
It all started in the beginning of August when Elon Musk tweeted to the public that he has “secured funding” surrounding a going private transaction. According to the tweet, the company would be taken private at $420.00 per share, which would have represented a decent premium.
As a result of the announcement, TSLA surged in the market. After all, a go-private transaction would immediately provide value to shareholders. However, investors waited and as days turned to weeks, it became clear that this “secured funding” was nonexistant. In fact, Musk waited until Friday night at 11PM to inform investors that the company would not be going private.
Not only should this type of false statement be reviewed by the SEC, it has led to a loss of trust for the CEO of the company. Of course, as the investors waited, the stock took on some tremendous losses. However, the implications go far further than this.
While the short-term effects of the misleading statements made by Musk are bad enough, the long-term pain this could cause may be worse. At the end of the day, when it comes to raising capital, which at current rates, TSLA will need to do soon, the Musk essentially short himself in the foot. After all, banks, institutional investors and retail investors consider the credibility of management when making decisions with regard to providing a publicly traded company with capital. With all credibility lost, it only makes sense that accessing the capital the company will need in the near future will be overwhelmingly difficult.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of Tesla, the news has been overwhelmingly negative as of late, leading to a downward spiral that started at around $380 per share and continues today. Of course, our partners at Trade Ideas were the first to alert us to the declines. Currently (8:12), TSLA is trading at $313.90 per share after a loss of $8.92 per share or 2.76% thus far today!
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on TSLA. In particular, we’re interested in following the company’s ongoing work to dig itself out of the hole it has been placed in by its CEO. Nonetheless, we’ll continue to follow the story closel and bring the news to you as it breaks!
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