Watching the goings on at Tesla these days, I’m reminded of the Queen classic “I’m Going Slightly Mad.”
I’m one card short of a full deck, I’m not quite a shilling
One wave short of a shipwreck, I’m not my usual top billing
I’m coming down with a fever, I’m really out to sea
This kettle is boiling over, I think I’m a banana tree
I’m going slightly mad, I’m going slightly mad
It finally happened, happened
It finally happened,
It finally happened
I’m slightly mad, very slightly mad
It’s hard not to admire Elon Musk and all he’s accomplished. But, while there’s obviously a method to his madness, it’s hard not to wonder if the pressure might be getting to him.
Just look at the stock. After going sideways for two years, TLSA spiked 10X in only 16 months (the red acceleration channel below.) But, once that channel played out, the stock struggled — going nowhere between Feb 2014 and Apr 2017.
Musk celebrated with a tweet.
On Mar 27, 2018, it fell back below that horizontal support and broke below a trend line (purple) connecting its two previous lows.
Again, Musk turned to Twitter — hoping shareholders would pass off the 37% decline since Sep 2017 as a clever April Fool’s joke. Most didn’t find it very funny.
Three days later, the company reported a 40% increase in overall Q1 production with a doubling of Model 3 production. TSLA recovered 13% that day and, the following day, pushed back through 300. But, the move didn’t hold. TSLA spent the next two months holding on for dear life. As we noted in early May [see: Can TSLA Avoid a Crash?] holding the purple trend line and 290 support was critical.
It has neckline support at 290 and trend line support at 270ish. Unless it drops below that support, resist that urge to short it.
Finally, when Musk assured shareholders at the company’s June 6 annual meeting that the Model 3 production would reach 5,000 units weekly by the end of the month, the stock soared again.
But, it didn’t stick. Despite Musk’s much-publicized open market purchase of his own shares, the stock couldn’t do more than backtest the broken white channel, falling well short of its September highs. It fell back below its 200-DMA and backtested 300 all over again.
It might still be sitting there if not for — that’s right — another tweet. This one dangles the prospect of an LBO at $420.
The fact that the stock is still sitting $50 below $420 means there are plenty of skeptics. In fact, the SEC is investigating whether an LBO is actually in the works, financing secured, or this was merely a ploy to help the stock recover.
At $420, the LBO would be the biggest in history, slightly exceeding the TXU deal in 2007. Interesting side note: the TXU deal was completed 4 days prior to the S&P 500’s 2007 peak and the beginning of its 54% crash. TXU filed for bankruptcy seven years later.
Let’s hope (for the sake of Elon Musk’s sanity) that TSLA has a better outcome. If the LBO is a hoax, don’t hold your breath.