6 ms·

Tesla stock is now back below its IPO price.

43 points by phreeza 16y ago

jeb 16y ago
The speculators done gone made a lot of money off the geeks. Tesla was a typical speculator IPO, now the reality of the risk facing the company will set in and the price will go to its standard level till they start to show real potential.
- padmanabhan01 16y ago
  If the speculators are able to make money off the geeks, who are the real geeks then?
  - phreeza 16y ago
    The finance geeks made money off the technology geeks?
    - deleted 16y ago
      [deleted]
    - illumin8 16y ago
      Alpha males win again. Keep trying, beta males.
      - kirubakaran 16y ago
        http://www.google.com/finance?q=goog http://www.google.com/finance?q=goog
        knieveltech 16y ago
        Flawless victory.
      - mahmud 16y ago
        That's a very literal alpha: http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29
- cynicalkane 16y ago
  Are you talking about the geeks at Tesla or the geeks who bought stock after the price jumped? If the former, companies often IPO at prices below what they're worth--if the IPO is issued at a fair price, then it's Tesla that benefits, not the speculators. If the latter, buying stock because it's going up is an act of speculation, not necessarily geekishness.
  - eru 16y ago
    Yes, I don't really get why any company would IPO below their fair price. Every time I see a company's stock go up massively on the first day, I ask me "Why did they not charge a higher price for their stock in the first place?".
    - dantheman 16y ago
      They don't sell all of their stock at the initial price, but sell it later at the higher prices.
      - eru 16y ago
        OK. But still, why sell even some of the stock lower than necessary? Or does the excitement created pay off in the longer term?
    - lkrubner 16y ago
      Leaving money on the table during an IPO is often attacked as a form of fraud. I recall it was a big issue during the peak of the Internet boom, 1997-2000. There you had a lot of startups desperate for money to fund their growth, and yet they gave away substantial amounts of money to speculators. There were clear abuses of "Friends and Family" blocks of stock -- these started getting handed out to anyone who could move the deal forward, with the understanding that the stock could be dumped on the opening day of trading. This amounted to a kind of bribe, an additional payment made in excess of all the normal IPO fees. Wikipedia offers this: http://en.wikipedia.org/wiki/Initial_public_offering http://en.wikipedia.org/wiki/Initial_public_offering "The underpricing of initial public offerings (IPO) has been well documented in different markets (Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992). While Issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a serious anomaly in the literature of financial economics. Many financial economists have developed different models to explain the underpricing of IPOs. Some of the models explained it as a consequences of deliberate underpricing by issuers or their agents. In general, smaller issues are observed to be underpriced more than large issues (Ritter, 1984, Ritter, 1991, Levis, 1990) Historically, IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Through flipping, this can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in "money left on the table"—lost capital that could have been raised for the company had the stock been offered at a higher price. One great example of all these factors at play was seen with theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998 the stock had been priced at $9 per share, and famously jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at $63 after large sell offs from institutions flipping the stock . Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table." All the same, Wikipedia also offers a charitable explanation for the phenomena: "The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose its marketability and hence even more of its value."
hugh3 16y ago
Pretty much exactly what that guy from Mad Money predicted would happen. I wouldn't invest in Tesla. Either electric cars take off or they don't, but if they do then the big car companies can easily muscle in and eat Tesla's lunch. Nissan and Chevy both have electric cars coming out soon which will present a much better value proposition than the Tesla Model S.
- bdlang 16y ago
  I don't believe the IPO is about the model S; it's about ramping up to build a sub 30K (or was it 20K) model at the newly acquired plant in Nor Cal, partnered with Toyota.
  - jaekwon 16y ago
    citations? I thought it was about the model S, e.g. model S _is_ their consumer model. wikipedia: "On May 20, 2010 Tesla Motors announced it would form a partnership with Toyota to produce a new lower-priced model along with the Model S at the former NUMMI assembly plant in Fremont, California.[6]"
    - joshfinnie 16y ago
      I am confused by our comment, jaekwon. It seems as though you are asking for proof and then give it. Maybe I am just misunderstanding, but the wikipedia quote does state that there is a new model along with the Model S.
      - jaekwon 16y ago
        You got me. I guess I skipped the words "along with" when scanning. To my credit, the cited link [6] tells nothing about a new lower-priced model other than the Model S.
    - deleted 16y ago
      [deleted]
- pavs 16y ago
kno 16y ago
I will argue that this is a good time to buy Tesla Stocks; this is a time for real geeks to make money.
- jaekwon 16y ago
  Yes, if you have spare capital, invest some in Tesla now with the risk of losing most of your investment. Think long term. Depending on the general mood of the stock market, I think the price will hover around 15~17 until we hear more news in the coming weeks.
- ars 16y ago
  No, not yet. A lot of people are going to panic sell. Then you will have those who will hold on hoping it goes back up at least to what they paid for it. The moment it does they too will sell. Wait till it stops going down, goes up for a bit, then down again. Only then think about buying. And for those who are hoping it goes up to at least what you paid for it: Please be aware you ALREADY lost your money. Waiting for it to go back up is poor investment strategy. You don't loose your money when you sell - you loose it instantly. Either you think it's a good buy right now (in which case buy some more, or hold what you have), or you don't think it's a good buy _right_now_, in which case sell and it makes no difference what you paid for it. Waiting for it to go back to what you paid for it will make you feel better, but in the long run you will loose money that way. Only keep a stock if you think it's a good buy at all times - pay absolutely no attention to what you paid for it. The present, and future is all that matters, the past doesn't.
feverishaaron 16y ago
The real smart geeks road the wave to 40% then shorted them on the way back down.
- bryanh 16y ago
  I'd be surprised if there was sufficient liquidity for shorts so soon after the IPO.
- flipp 16y ago
  http://twitter.com/jackflips/status/17370679933 http://twitter.com/jackflips/status/17370679933 :)
arnorhs 16y ago
Maybe a perfect time to buy? Their brand is now recognized as the electric car manufacturer. As long as this trend continues, they will submerge as the winner. I've also heard that their technology is somewhat unique and that they've found solutions to many hard problems. Do they have any patents?
- pchristensen 16y ago
  ...they will submerge... Freudian slip?
  - arnorhs 16y ago
    Sorry about that. You're right. http://www.google.is/search?q=define:submerge http://www.google.is/search?q=define:submerge I'm not a native English speaker, so sometimes it's difficult to find the right word and something pops up in my mind and I think it's correct.
    - ars 16y ago
      The word you were looking for was emerge.
      - arnorhs 16y ago
        Exactly ! Thanks :)
- Silhouette 16y ago
  > Their brand is now recognized as the electric car manufacturer. The question I would ask before investing is: how many people care? It's good to be the market leader, but still not worth much if your whole market is tiny. Maybe this is a national perspective thing: I'm in the UK, and the car market does vary more than most from country to country. But over here, I'd say the main interest in new drives today is in hybrids rather than pure electric cars. The network of charging stations required for pure electric just doesn't exist yet. In hybrid world, the Prius rules for everyday driving and Lexus have run a good PR campaign to claim the high end of the market, and it's hard to see how anything Tesla have proposed so far would create any significant shift.
mattmaroon 16y ago
Not surprising. The market's collective thinking is normally pretty short-term, and shares of a company that's forecast involves a best case scenario of generating real revenues 2 years from now wouldn't be expected to be in-demand.
- nostrademons 16y ago
  It's interesting how this has changed since the dot-com boom, where shares of AMZN in 1998 had the same price that they did in 2008, even though it wasn't expected to turn a profit until 2002.
tocomment 16y ago
Why are there no stock options (calls/puts) offered for TSLA? Will that change in the future?
- joe-mccann 16y ago
  Yes. Not enough historical volatility currently to price options contracts accurately.
  - tocomment 16y ago
    Thanks. I didn't think about that. How much history would they want?
deleted 16y ago
[deleted]
joe-mccann 16y ago
Actually, the reason for the insane run-up on it's inital day and second day of trading had very little to do with speculation, but more to do with TSLA being an "extremely hard to borrow" stock on those days. When a stock is hard to borrow, it means it is nearly impossible to short sale the stock. Think AIG when they were melting down. That was a stock that no one wanted loan out for short sales because at the time, their demise was imminent. Not necessarily the same thing with TSLA, but that's what hard to borrow equates to... So all theories and ideas of why the run up and why the subsequent sell off are essentially wrong. When a stock can only go in one direction, then it can only go in that direction.

43 points by phreeza 16y ago

jeb 16y ago

The speculators done gone made a lot of money off the geeks. Tesla was a typical speculator IPO, now the reality of the risk facing the company will set in and the price will go to its standard level till they start to show real potential.

padmanabhan01 16y ago
If the speculators are able to make money off the geeks, who are the real geeks then?
- phreeza 16y ago
  The finance geeks made money off the technology geeks?
  - deleted 16y ago
    [deleted]
  - illumin8 16y ago
    Alpha males win again. Keep trying, beta males.
    - kirubakaran 16y ago
      http://www.google.com/finance?q=goog http://www.google.com/finance?q=goog
      - knieveltech 16y ago
        Flawless victory.
    - mahmud 16y ago
      That's a very literal alpha: http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29
cynicalkane 16y ago
Are you talking about the geeks at Tesla or the geeks who bought stock after the price jumped? If the former, companies often IPO at prices below what they're worth--if the IPO is issued at a fair price, then it's Tesla that benefits, not the speculators. If the latter, buying stock because it's going up is an act of speculation, not necessarily geekishness.
- eru 16y ago
  Yes, I don't really get why any company would IPO below their fair price. Every time I see a company's stock go up massively on the first day, I ask me "Why did they not charge a higher price for their stock in the first place?".
  - dantheman 16y ago
    They don't sell all of their stock at the initial price, but sell it later at the higher prices.
    - eru 16y ago
      OK. But still, why sell even some of the stock lower than necessary? Or does the excitement created pay off in the longer term?
  - lkrubner 16y ago
    Leaving money on the table during an IPO is often attacked as a form of fraud. I recall it was a big issue during the peak of the Internet boom, 1997-2000. There you had a lot of startups desperate for money to fund their growth, and yet they gave away substantial amounts of money to speculators. There were clear abuses of "Friends and Family" blocks of stock -- these started getting handed out to anyone who could move the deal forward, with the understanding that the stock could be dumped on the opening day of trading. This amounted to a kind of bribe, an additional payment made in excess of all the normal IPO fees. Wikipedia offers this: http://en.wikipedia.org/wiki/Initial_public_offering http://en.wikipedia.org/wiki/Initial_public_offering "The underpricing of initial public offerings (IPO) has been well documented in different markets (Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992). While Issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a serious anomaly in the literature of financial economics. Many financial economists have developed different models to explain the underpricing of IPOs. Some of the models explained it as a consequences of deliberate underpricing by issuers or their agents. In general, smaller issues are observed to be underpriced more than large issues (Ritter, 1984, Ritter, 1991, Levis, 1990) Historically, IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Through flipping, this can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in "money left on the table"—lost capital that could have been raised for the company had the stock been offered at a higher price. One great example of all these factors at play was seen with theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998 the stock had been priced at $9 per share, and famously jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at $63 after large sell offs from institutions flipping the stock . Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table." All the same, Wikipedia also offers a charitable explanation for the phenomena: "The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose its marketability and hence even more of its value."

hugh3 16y ago

Pretty much exactly what that guy from Mad Money predicted would happen. I wouldn't invest in Tesla. Either electric cars take off or they don't, but if they do then the big car companies can easily muscle in and eat Tesla's lunch. Nissan and Chevy both have electric cars coming out soon which will present a much better value proposition than the Tesla Model S.

bdlang 16y ago
I don't believe the IPO is about the model S; it's about ramping up to build a sub 30K (or was it 20K) model at the newly acquired plant in Nor Cal, partnered with Toyota.
- jaekwon 16y ago
  citations? I thought it was about the model S, e.g. model S _is_ their consumer model. wikipedia: "On May 20, 2010 Tesla Motors announced it would form a partnership with Toyota to produce a new lower-priced model along with the Model S at the former NUMMI assembly plant in Fremont, California.[6]"
  - joshfinnie 16y ago
    I am confused by our comment, jaekwon. It seems as though you are asking for proof and then give it. Maybe I am just misunderstanding, but the wikipedia quote does state that there is a new model along with the Model S.
    - jaekwon 16y ago
      You got me. I guess I skipped the words "along with" when scanning. To my credit, the cited link [6] tells nothing about a new lower-priced model other than the Model S.
  - deleted 16y ago
    [deleted]
pavs 16y ago

kno 16y ago

I will argue that this is a good time to buy Tesla Stocks; this is a time for real geeks to make money.

jaekwon 16y ago
Yes, if you have spare capital, invest some in Tesla now with the risk of losing most of your investment. Think long term. Depending on the general mood of the stock market, I think the price will hover around 15~17 until we hear more news in the coming weeks.
ars 16y ago
No, not yet. A lot of people are going to panic sell. Then you will have those who will hold on hoping it goes back up at least to what they paid for it. The moment it does they too will sell. Wait till it stops going down, goes up for a bit, then down again. Only then think about buying. And for those who are hoping it goes up to at least what you paid for it: Please be aware you ALREADY lost your money. Waiting for it to go back up is poor investment strategy. You don't loose your money when you sell - you loose it instantly. Either you think it's a good buy right now (in which case buy some more, or hold what you have), or you don't think it's a good buy _right_now_, in which case sell and it makes no difference what you paid for it. Waiting for it to go back to what you paid for it will make you feel better, but in the long run you will loose money that way. Only keep a stock if you think it's a good buy at all times - pay absolutely no attention to what you paid for it. The present, and future is all that matters, the past doesn't.

feverishaaron 16y ago

The real smart geeks road the wave to 40% then shorted them on the way back down.

bryanh 16y ago
I'd be surprised if there was sufficient liquidity for shorts so soon after the IPO.
flipp 16y ago
http://twitter.com/jackflips/status/17370679933 http://twitter.com/jackflips/status/17370679933 :)

arnorhs 16y ago

Maybe a perfect time to buy? Their brand is now recognized as the electric car manufacturer. As long as this trend continues, they will submerge as the winner. I've also heard that their technology is somewhat unique and that they've found solutions to many hard problems. Do they have any patents?

pchristensen 16y ago
...they will submerge... Freudian slip?
- arnorhs 16y ago
  Sorry about that. You're right. http://www.google.is/search?q=define:submerge http://www.google.is/search?q=define:submerge I'm not a native English speaker, so sometimes it's difficult to find the right word and something pops up in my mind and I think it's correct.
  - ars 16y ago
    The word you were looking for was emerge.
    - arnorhs 16y ago
      Exactly ! Thanks :)
Silhouette 16y ago
> Their brand is now recognized as the electric car manufacturer. The question I would ask before investing is: how many people care? It's good to be the market leader, but still not worth much if your whole market is tiny. Maybe this is a national perspective thing: I'm in the UK, and the car market does vary more than most from country to country. But over here, I'd say the main interest in new drives today is in hybrids rather than pure electric cars. The network of charging stations required for pure electric just doesn't exist yet. In hybrid world, the Prius rules for everyday driving and Lexus have run a good PR campaign to claim the high end of the market, and it's hard to see how anything Tesla have proposed so far would create any significant shift.

mattmaroon 16y ago

Not surprising. The market's collective thinking is normally pretty short-term, and shares of a company that's forecast involves a best case scenario of generating real revenues 2 years from now wouldn't be expected to be in-demand.

nostrademons 16y ago
It's interesting how this has changed since the dot-com boom, where shares of AMZN in 1998 had the same price that they did in 2008, even though it wasn't expected to turn a profit until 2002.

tocomment 16y ago

Why are there no stock options (calls/puts) offered for TSLA? Will that change in the future?

joe-mccann 16y ago
Yes. Not enough historical volatility currently to price options contracts accurately.
- tocomment 16y ago
  Thanks. I didn't think about that. How much history would they want?

deleted 16y ago

[deleted]

joe-mccann 16y ago

Actually, the reason for the insane run-up on it's inital day and second day of trading had very little to do with speculation, but more to do with TSLA being an "extremely hard to borrow" stock on those days. When a stock is hard to borrow, it means it is nearly impossible to short sale the stock. Think AIG when they were melting down. That was a stock that no one wanted loan out for short sales because at the time, their demise was imminent. Not necessarily the same thing with TSLA, but that's what hard to borrow equates to... So all theories and ideas of why the run up and why the subsequent sell off are essentially wrong. When a stock can only go in one direction, then it can only go in that direction.