It has not been an easy week for Tesla (TSLA) .
Well, at least not for the bulls, Tesla's board of directors and Ambien using CEO Elon Musk. In fact, Musk will spend a moment on Sunday pondering a tweet to sleep guru turned Uber board member Arianna Huffington. It is Huffington who penned a piece this week slamming Musk's work habits and encouraging him to change course.
That apparently isn't an option, according to Musk's tweet.
The Tesla bears on the other hand are having a great time as shares have plunged 15% since Musk's Aug. 7 "funding secured" tweet.
But don't give up on Musk's proposed $420 deal price or the stock more broadly, says experts TheStreet contacted.
Ford & Tesla are the only 2 American car companies to avoid bankruptcy. I just got home from the factory. You think this is an option. It is not.— Elon Musk (@elonmusk) August 19, 2018
Does the Deal Get Done?
To be sure, the debate on Tesla rages on. Is the recent selloff on worries about Musk's instability, his exhaustion and the SEC looking into the privatization efforts overdone?
"For the energy industry, Tesla going private really just speaks to the fact that there are large pools of private capital being directed toward all facets of the clean energy story," said Mike Neylan the CEO of Cellcube. "In this case, it is a Saudi Sovereign Wealth Fund contemplating an investment in zero emission EVs and the broader trend toward the electrification of society based on renewable sources. Public or private, the support is there."
- Tesla Has Lost 15% Since Musk's Take-Private Tweet
- Use Extreme Caution as Tesla's Stock Breaks Below This Key Price
Others on Wall Street agree.
Gene Munster at Loup Ventures points out that "there is a greater than 50% chance Tesla becomes a private company." Munster and his team further suggest that it would take about $25 billion to $30 billion in funding to get the deal done.
Should the deal happen following a number of key steps -- including secured funding and creating an investment vehicle for current shareholders to remain invested in the company -- Munster estimates a deal could be completed in as little as three months and as many as nine months.
Meanwhile, Oppenheimer analyst Colin Rusch says he is closely monitoring the SEC inquiry into Musk's tweet. Rush acknowledges that should a "large enough financial sponsor and a compelling structure [become] known," it could signal a move to $420 for the stock.
Should a transaction come to light, then it could take 6 to 12 months to close, Rusch says.
Fisker founder Henrik Fisker tells TheStreet's Executive Editor @BrianSozzi he wants to take his electric car company public. Watch below.
Gauging Market Sentiment
Musk's surprise announcement came less than a week after the automaker reported better than expected second quarter results. Management reiterated its guidance to be GAAP profitable and cash flow positive for the remainder of the year and said that Model 3 production was going well.
That's why before Musk's go-private tweet, Tesla sentiment on StockTwits sat at a very bullish 71% says Michael Bozzello, director of community at StockTwits.
Now though, that sentiment gauge has plunged to just 55% bullish. With the year-to-date average of 62%, could that put Tesla's stock near dead-cat bounce territory? According to the company's data, the lowest bullish sentiment in 2018 came on April 2, when it stood at just 42%. Not surprisingly, that's when shares put in a low, tagging $245 and rallying higher afterwards.
Read More Tesla'd:
- 3 Simple Reasons Elon Musk Is Right to Consider Taking Tesla Private
- Why Tesla Is Speeding Toward a $100 Billion Market Cap
Typically, price drives sentiment on a stock. But given the drastic change in sentiment on Tesla in such a short period of time, Bozzello makes the case that in this instance, it may be the other way around. That is, sentiment (which has worsened lately) is driving down the share price.
That's as investors read headlines and articles -- such as the disturbing New York Times interview with Musk -- and digest the news. Even still, StockTwits data is compelling enough to suggest Tesla's stock is approaching a short-term bottom provided no more Musk bombshells emerge.
"No one bought Tesla to sell at $420. They bought it because, over 10 years, it could be worth 10 times that. It could be the next Amazon or Google," reminds Ross Gerber, president and CEO at Gerber Kawaski.
Now have at us on Twitter, Tesla shorts.
To contact the writer:
Via Twitter @BretKenwell