The buzz surrounding Tesla (NASDAQ:TSLA) lately has focused more on the business than its creations. The latest move by CEO Elon Musk involves taking the Silicon Valley-based automaker private. Musk feels the company could operate more smoothly without the increased scrutiny or the quarterly reports. However, Tesla has also dealt with supply and financial concerns. Some of Musk’s actions have also served to undermine confidence in TSLA stock. Although the buyout would mean a substantial premium over the stock’s current price, I recommend investors stay away from Tesla.
TSLA Stock Has Fallen Despite Premium
The behavior of TSLA stock speaks volumes. Wall Street tends to reward vision handsomely as high-valuations equities such as Amazon.com (NASDAQ:AMZN) or Netflix (NASDAQ:NFLX) indicate. Consequently, investors bid TSLA stock to a high level — even with the production delays and doubts about the company’s finances. Despite the fact that GM (NYSE:GM) produced about 95 times as many cars as Tesla in 2017, TSLA stock supports a higher market cap.
However, the TSLA stock price also reflects doubts about the $420 per share buyout deal. As of now, the stock trades at around $320 per share. Although the stock is trading at about $100 per share below the buyout price, short interest also remains high.
Musk’s Behavior Undermines Confidence in TSLA Stock
Musk could not have chosen a more appropriate name for his company when he named it Tesla. Musk has become the Nikola Tesla of our time. His launch of PayPal (NASDAQ:PYPL) opened up credit card payments to the masses. Today, Tesla’s advancements in battery technology could change the way we fuel cars and provide electricity to homes.
Unfortunately, Musk also shares Tesla’s lack of business acumen. Tesla has lost money since the company began. Now, manufacturing delays with the Model 3 and the company’s solar roof panels cast doubts on the company’s abilities to deliver. Reports of suppliers who have not been paid reinforce those concerns.
Erratic behavior during a conference call and on Twitter (NYSE:TWTR) have further undermined confidence in the company’s leadership. Mr. Musk’s behavior indicates he may be doing more to destroy his company (or himself for that matter) than he is doing to save TSLA stock.
I agree with our own Aaron Levitt that Tesla should go private. I also agree that such an occurrence remains unlikely, at least at $420 per share. Also, if this deal falls through, I do not see where Tesla will get its needed funding short of stock dilution. Tesla’s bonds have recovered since plunging in July. However, both Moody’s Investor Service and Standard & Poor’s rate Tesla’s debt as junk.
Sadly, I cannot recommend TSLA stock. I think Musk shows the most vision and inventive ability since Steve Jobs. However, he appears to lack the business talents that set the stage for Apple (NASDAQ:AAPL) to become the world’s largest company. Tesla will look forward to no such future under Musk’s leadership.
Final Thoughts on AAPL Stock
Investors should avoid TSLA stock — despite the potential premium they could gain if the stock goes private. If the deal goes through, investors would receive about a 32% premium. Despite this premium, the stock has fallen by more than 15% since Musk announced his intentions on Twitter on Aug. 7.
Word of financial troubles and the erratic behavior of Musk have put the company under a cloud. Honestly, I am surprised the shorts have not made more money so far. I hope Musk can succeed in bringing his ideas to market in great numbers. Unfortunately for TSLA stock investors, his management shortfalls will make it more difficult for investors to profit from such ideas.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.