Tesla is now a huge deal in the world, and its stock $tsla is now a topic of constant debate. The current documentary on Elon Musks rise is worth watching as a background. What we have here is an individual that with luck, courage and ingenuity is creating the world he has dreamed of.
Now the stock, NYSE:TSLA what is it? Because it never adheres to valuations and all kind of things are said about it. Some are pure bulls (Gary Black, Value Analyst), some are pure bears (Michael Burry), there’s TeslaQ, which is a group of short sellers where notably Bill Gates is a member of. As I will explain in the next paragraphs, all this pushing and pulling should give you an idea about what determines the valuation of $tsla at the moment.
What is a stock? Its a certificate of co-ownership of a company (officially). The influence of a stock/share holder may vary, at Tesla sharholder meetings shareholders get to make proposals and decisions, so Tesla shareholder status is a real thing you buy when you buy $tsla. However this is not the main focus of shareholders, it mainly is the stock price, its value.
Early investors are people that want the company to exist and be able to grow. This requires both risk taking and understanding what a company tries to achieve. You can get burned, some companies are fundamentally dishonest
The value of a stock depends on how much people want to own it and how much money these people have. If you double the money supply, you double stock prices eventually (this is the reason stocks and home prices always go up : constant inflation). But the real question here is : Is there a hard value in owning a stock. My answer is that if the stock does not pay dividend the intrinsic value of it is zero.
Stocks have a crypto phase
If a company issues stock and it does not lose control over itself in the process, the money the stock was sold for is now owned by the company to work with. If the company does not need any more money to operate, that is it. Why would you own the stock? No reason. Why would it become more valuable? No reason. It is what it is, a certificate of co-ownership.
Even if the company doubles in size, if it tripples its sales, if it does not need anything from stockholders (because it is profitable) the stockholders are to be thanked for their contribution. The stock can basically sink to zero. There is no future dynamic in it. Why would you own an empty box?
There have been cases of non-existent company stock being traded on the NYSE, which where eventually canceled and the people responsible fined (a tiny bit). If a stock does not do anything else but be listed on the exchange then it is very similar to crypto currencies. Tesla stock was until recently still in its pure ‘crypto-phase’, and this is very honestly admitted by its status until recently of ‘junk stock’. Now moving forward I expect things to change, maybe in ways that will make it make more sense to own it.
Dividend turns a stock into an interest carrying ‘loan’
First of all the stock should pay dividend. This turns it into a kind of direct loan to Tesla. Dividend is not liked a lot because it is taxed in most countries. However it turns crypto-$tsla into Dollar-$tsla even if the dividend is tiny. This would also inform people because you would be able to say ‘revenues grew by 50% so the dividend also grew by 50%’ even if the dividend is actually only 1% of renevue and each shareholder gets $0.0004269 per share per year. Less information is lost in the ‘database transactions’.
Paying dividend is the only real thing Tesla can do in the common repertoire (afaik). In reality though it can do more. This is because people want to own Tesla for speculative reasons. With the changes underway (global fossil energy cuts) there is another selling point for Tesla : It will persist. In other words, whereas GM or F can just suddenly fold, Tesla won’t. And whereas the USD can just inflate itself into oblivion, TSLA will ride that inflation from top to bottom, and even when there’s a new replacement currency. This is one of the reasons why people buy the stock, because they know it will be around. The more it will be around, the more they like the stock.
Tesla is working to create the Roboeconomy.com
In this respect Tesla has a lot to offer, solar, cars, robots, autonomous driving software, compute hardware. It will be around. The other companies of the S&P 500 may or may not thrive in the world we are moving into, the Roboeconomy.com, the solar and wind powered, AI driven, robotics exploiting world. Many companies do not belong in the Roboeconomy. To give an example :
Say you have solar and batteries and all processes that feed you and make your home comfortable and move you around are electrified. Say that electricity is traded in a currency called the JouleCurrency.org (which allows you to shift electric energy from solar power plants to batteries near production facilities) and you are one of the people maintaining the system, or you own it because Tesla gave its stock owners ownership of the assets of its utility branch (which it has). Then for living your life, you don’t need banks. You have a currency, but it is your own, it is generated by the solar power plant you own. For you none of the banks in the S&P 500 matter anymore.
Now as far as I understand Tesla is working on this, because it makes sense. We have such a system at the moment, only we mentally separate the banks from the fossil fuel companies, because we are easily fooled. If Tesla would announce that stock holders would receive ownership of fruits of its energy assets this would of course be a great reason to own the stock. Right now though the energy is still sold in the fossil economic system, where fossil banks put heavy debt on any asset because they supply the fossil credit (the fossil energy) used to create them. This will stop once Tesla (or a similar company) can produce batteries, solar panels etc. using only its own renewable energy sources.
I may make a list of all S&P 500 companies and their Roboeconomic potential. Many have none, they will disappear. For now the potential of the Tesla company is amazing, mind blowing. But this does not mean the stock has to be stellar, because there is no intrinsic value link between the stock and what the company does. It would be nice if a link was created. This is what I have been advising for crypto since the beginning (12 years ago), tie it to a real world value. But it may well be Tesla will issue its own energy credit soon, and this will mean war with the Federal Reserve and other banks, and this is the main reason Tesla gets dumped on in the media almost non-stop. This is the reason why hard line pessimists like Bill Gates short the stock.
The best way to fight this at the moment is to enable companies like Tesla, ones that bring about the Roboeconomy.com, bear their sell off to finance things, and then when people start running from other stocks (who may also pay no dividend) into Tesla and companies like it around the world, the stock will appreciate. Better still on a personal level (as stocks are often thought of as a way to secure your existence when you can’t work anymore) is to make sure that where you live, all energy is renewable, storage is available, laws help you develop other solutions, and banks rendered powerless (don’t go into debt!).