Elon Musk (by Heisenberg Media)
Tesla’s initial public offering was held on June 29, 2010. If you were lucky enough to be among its first public investors, you could have snagged a snare for around $17.
By the end of that first day, Tesla shares had risen to $23.89 — quite a feat, considering that the Nasdaq was down 3.85 percent on June 29, 2010, and the Dow had dropped by 2.65 percent. It was a sign of things to come.
Over the past decade, Tesla faced obstacle after obstacle. As it initially burned through cash with no sign of consistent profitability in sight, critics predicted Tesla’s imminent collapse. At times, even well after it demonstrated profitability, Tesla was the most-shorted stock on the U.S. market. Controversy perennially surrounded the Twitter habits of Tesla’s CEO, Elon Musk, and virtually everything else people could come up with to criticize him about.
Yet, Tesla slowly marched ahead. The electric automaker churned out more and better vehicles, and discerning consumers snatched them up with gusto. Tesla began outperforming profit expectations. Soon, it became the most valuable U.S. automaker in history, and for a brief period, Tesla overtook Toyota to become the most valuable car company in the world. Short sellers who sought to profit from Tesla’s downfall lost billions.
As I write this, one share of Tesla stock is valued at $1,008.10. That means an investor who got in at the original IPO price of $17 per share would have realized a 5,930 percent return.
For purposes of comparison, the broader S&P 500 index gained approximately 289 percent over roughly the same period. The S&P 500 hasn’t performed badly over the past decade by any means, but next to Tesla stock, well, it’s a bit like comparing the rolling hills of Kentucky to the Himalayas.
Perhaps all the more impressive, a good deal of Tesla’s gains have taken place over the past six months of national and global chaos. Almost every stock took a battering in March as the COVID-19 lockdowns went into effect, including Tesla. Stocks generally rebounded significantly, and Tesla was among the many stocks to make a sharp dip followed by a relatively quick recovery. But a good amount of the recent rise in Tesla’s share price appears to be independent of the recent broader market recovery. Six months ago, at the close of trading on December 23, 2019, a share of Tesla was going for $419.22. But Chinese health officials had not reported a cluster of acute respiratory illness originating in the city of Wuhan until December 31, 2019. So, in spite of all the market turbulence associated with the coronavirus pandemic, Tesla’s share price has more than doubled in the past six months.
The World Bank forecasts that we are facing the deepest economic recession since World War II. In addition to the health and economic threats of COVID-19, mass demonstrations against racial injustice have swept across the nation and the world. Throughout all of this, the United States has been burdened by a leader who is not so much asleep at the wheel as he is deliberately driving off a cliff with all of us in the passenger seat. Despite these challenges, Tesla’s share price has not just shown tremendous resiliency: it has shown tremendous growth.
This is not the end of Tesla’s hardships. We have not seen the end of production issues. We’ll hear about some more fun tweets from Elon Musk. The share price will go up, and it will go down. But a decade out from its IPO, with a return of nearly 6,000 percent for its early public investors, Tesla has undisputedly demonstrated its viability as a company and has embarrassed its many critics. Even more importantly, Tesla has given us a glimmer of hope that perhaps a toxic overreliance on fossil fuels is not our inevitable future. That is some good news, at a time when I think we could all really use it.
Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.