May 27, 2013 – Shares of Tesla (TSLA), that automaker-slash-tech-darling, crossed 100 today for the first time, after already tripling this year. The headline reason is the electric vehicle upstart’s planned announcement of an expansion to its Jetson-esque charger network this week. But the real reason continues to be: Short sellers got this story very wrong, and they continue to bolt as boffo headlines hit the tape.
At approximately 20 percent of Tesla’s float, short interest has been halved in a little over a month amid unflinchingly positive news. A better-than-expected quarterly report and a surging share price have enabled Tesla to raise money by selling stock—a development that sent its share price yet higher. Chief Executive Elon Musk upped the ante by purchasing $100 million of the offering, which is being used to prepay the loan Tesla got from the U.S. Department of Energy. And all this after an effusive review from Consumer Reports.
The infusion from the stock sale will also fund development of new models—Tesla currently sells only its $70,000 Model S roadster, but it wants to roll out an SUV and a third vehicle that would sell for half the Model S’s price—and set a price floor of sorts for new investors who buy the offering, says Andrea James of Dougherty & Co. in Minneapolis.
James likes how much skin Musk has in the game: almost a quarter of Tesla’s shares outstanding. She crunched numbers to compute how a Tesla that profitably executes on all fronts can produce a stock ranging in price from 120 to 180, especially if the company continues to roll out vehicles and headlines that keep investors stoked to pay first and ask questions later. And keep shorts asking—and bolting.