Tesla Stock has hit a monumental $420 per share. This is a big win for Elon Musk in so many ways.
Let’s find out how it can turn things around for Musk and company.
The SEC Problem
Remember when Musk was being investigated by the Securities and Exchange Commission after he tweeted out the ever so famous tweet regarding taking his public company Tesla private, and that funding was secured for $420 a share?
The share price at the time was $379.57 to be exact and not $420. This led to speculation on who the mystery buyer was. Many people even disregarded the announcement as a joke as the figure 420 is popular in Cannabis Culture, and Musk has publicly smoked weed on Joe Rogan’s podcast, sending both pop culture and the tech world into a frenzy.
Musk and his weed smoking and referencing made him even more legendary. He became a meme. But this caused him a great deal of trouble.
The SEC would conduct an investigation shortly thereafter and come to an agreement with Musk.
Elon Musk has admitted that the sovereign fund of Saudi Arabia approached him several times offering to buy his company, but even at the end of 2018 he said he firmly believed the right direction for Tesla was to remain public.
It was the tweets that got him in trouble, not just with the SEC but also his existing investors. On the day of tweets, the shares did rise by an 11%, even when trades for Tesla stocks was stopped for an hour. Even then, the number never approached $420 per share and the stock slumped the very next day.
The SEC believed that Musk was exaggerating as the funds that would actually make taking Tesla private were in the billions. They thought that he was making those announcements on purpose to artificially inflate the stock prices of Tesla, making shareholders believe that outside investors would pay that much for a share.
Elon Musk paid $20 million in fines in October 2018, he also stepped down as Chairman of Tesla.
The leader of Tesla would have to go back to work and be a bit more restrained than the President of the United States with his Twitter account.
Well, things are looking up for the silicon valley innovator and have been going well for both Musk and Tesla stockholders.
The Tesla stock hit $420 and is now at $429 per share.
Why is the 420 Number So Important?
The slang refers to smoking weed, and 4/20 is the venerable date dedicated to cannabis. The cannabis reference of 420 is not lost on Musk as he joked again on Twitter “Whoa… the stock is so high lol”
In another tweet he captured the progress of the stock at a final $420.69 and captioned it “stock art” except this time he was referring to the 69. Remember that Elon Musk is very active on Twitter and this time around too, people paid attention, even to the point that PornHub even responded.
Musk certainly knows how to attract attention.
The whole year the company’s stock has been volatile, but nearing the Christmas Holidays the shares went over $420. It is a nearly 27% up and the company has already announced some innovative inventions and vehicles this year including the all electric ATV and the Cybertruck, which is both controversial and hugely popular. This year Tesla also announced the production of Model Y to take place in 2020 and they already announced a new factory in Germany while it opens a new one in China.
We also saw a rise in the stock price after the company received $1.4 billion from Chinese Banks. Tesla was valued at $76 billion. That’s a very important note. Granted, the funding is solely to build the plant in China, but it seems that the market sees that as a positive sign overall.
What Does Elon Musk and Tesla Shareholders Get From This?
A CEO’s compensation may be based totally on the stock options. If Tesla’s valuation keeps rising, Musk will stand to make billions. However this victory is about something more, it’s about belief.
No one believed that Tesla could sell each share at the exact price of $420/unit, well, that’s the reality now. Through the turmoil, the investigations, and the naysayers, it does seem like Elon and Tesla stockholders got the last laugh.
As a matter of fact, if you had the fortitude and foresight to have purchased Tesla shares on May of this year, you could have picked them up for $185 a share. You would have seen a significant upside with the current price the way it is today.
What I’m interested in seeing is if Tesla stock will dip significantly over the course of the next year. I know that bears are watching and waiting for it to happen.
But what are some factors that could cause Tesla stock to fall in the next year?
Well, we could see a general stock market correction and a recession.
We could witness some other faults found within Tesla’s Balance sheet or Income Statement that cause a decline in the share price too.
Both of the above scenarios seem like high probability events but we’ll see. Tesla seems to defy odds.
Will the brand continue to do so?