Tech

Tesla stock reaches $420 more than a year after Musk's notorious 'funding secured' tweet

Key Points
  • Tesla stock briefly hits $420 per share Monday, more than a year after CEO Elon Musk tweets he has "funding secured" to take the company private at $420 a share.
  • In the 16 months that follows, Tesla stock bottoms out at a three-year low just under $177 per share in June before boomeranging back up and breaching $420 on Monday.
  • The road to $420 is marked by setbacks but is capped off by a surprisingly profitable third quarter and a so far stellar end of the year.
Tesla co-founder and CEO Elon Musk gestures while introducing the newly unveiled all-electric battery-powered Tesla Cybertruck at Tesla Design Center in Hawthorne, California on November 21, 2019.
FREDERIC J. BROWN | AFP | Getty Images

Tesla stock reached an all-time high of $422.01 before closing Monday at $419.22, up more than 3% and bringing Tesla's market cap to more than $75 billion. The stock surpassed $420 more than a year after CEO Elon Musk tweeted he had "funding secured" to take the company private at that share price.

The now-infamous Aug. 7, 2018, tweet sent the stock soaring, but it also marked the beginning of a chaotic ride for both the company and Musk. In the 16 months that followed, Tesla stock bottomed out at a three-year low just under $177 per share in June before boomeranging back up and breaching $420 on Monday.

Musk marked the occasion with a joke.

The road to $420 wound through new performance records as well as extreme low points that have brought litigation, government inquiries, layoffs and operational challenges. That journey was capped off by a surprisingly profitable third quarter and a so far stellar end of the year.

In the aftermath of the original tweet, Musk announced that Tesla would remain a publicly traded company, but that wasn't enough to calm investors' nerves. Tesla stock dropped about 16% over the three weeks following the tweet.

Musk was quick to stun investors again when he appeared just weeks later on the Joe Rogan podcast and smoked what appeared to be marijuana during a wide-ranging interview. The antic drove the stock down another 6.3% the next day and sparked calls for his resignation and questions about his mental stability.

The SEC then sued Musk for securities fraud because he failed to disclose the proper documents before announcing the intent to take Tesla private. The SEC sought to ban Musk from holding officer or director positions at any publicly traded company. Musk held onto his role as CEO by settling with the SEC, though he was forced to relinquish his role as chairman and pay a $20 million fine.

"This unjustified action by the SEC leaves me deeply saddened and disappointed," Musk said at the time in a statement to CNBC. "I have always taken action in the best interests of truth, transparency and investors. Integrity is the most important value in my life and the facts will show I never compromised this in any way."

After the settlement, Tesla shares jumped 17.35% to $310.70, but the stock turned south again days later when Musk mocked the SEC in a tweet, calling the agency the "Shortseller Enrichment Commission." Shares closed the following day down 7% at $261.95 per share.

The company recovered a bit when it reported a surprisingly profitable third quarter of 2018. The report showed better-than-expected car sales and a faster timeline on its Model 3 production, sending stock soaring more than 12%. Musk described it as an "incredibly historic quarter."

The celebration was short-lived. In the fourth quarter, Tesla announced it would cut 7% of its workforce and Musk wrote in an email to employees that the company faces a "very difficult" road ahead. The January layoffs affected at least 1,000 California employees and sent the stock down 13%.

When Tesla reported a profitable fourth quarter the same month as layoffs, it wasn't enough to satisfy Wall Street, and the stock took a 5% hit.

Stock falls below $200

Tesla stock dipped below $200 a share in late May as Morgan Stanley auto analyst Adam Jonas cut the firm's worst-case forecast on Tesla's stock from $97 a share to just $10, citing concerns about the company's increased debt load and geopolitical exposure.

Other major analysts followed suit, including Goldman Sachs, which slashed its price target a month later on concerns about demand for Tesla vehicles. UBS' Colin Langan also cut his price target by 20% in June to $160 a share and reiterated his sell rating.

The concerns followed several changes to Tesla's business plans, including an announcement to shift to an online sales model that would result in many store closings and price cuts.

The stock spiraled to its lowest point in three years on June 3 at $178.97 per share.

Third-quarter comeback

The stock rebounded in October after Tesla reported better-than-expected earnings and a surprise profit. The company also told shareholders that it is ahead of schedule with its new factory in Shanghai. Shares spiked more than 20%.

Tesla's new Shanghai Gigafactory, the company's first outside the U.S., is now slowly ramping up in China, but analysts don't expect to see mass production until next year. Musk has hailed the factory and the Chinese market as key to the future of the company, as demand for Tesla vehicles increases in China.

The company was expected to reduce labor costs and increase profit margins at the facility, but Bloomberg reported Wednesday that the company is considering cutting the price of its China-built Model 3 sedans by 20% or more. Progress at the plant has nonetheless been a hopeful sign for a company that has historically missed forecasts for start of production.

In November, Musk announced plans for the company's fourth gigafactory in Berlin. Tesla sales have increased in European countries throughout the first three quarters of 2019, despite a slowdown in the overall market for new cars in the region. Bloomberg reported over the weekend that Tesla is one step closer to realizing the factory after the company agreed to the text of a land acquisition contract for the site.

Musk also told shareholders on the company's third-quarter earnings call that Tesla is ahead of schedule on its long-awaited Model Y crossover, which it now expects to launch by next summer. And the company has of course since debuted the love-it-or-hate-it Tesla Cybertruck.

— CNBC's Michael Wayland and Lora Kolodny contributed to this report.

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Two analysts debate Tesla's road to $420 per share