Tesla Motors (TSLA) has been a rising star on the stock market since its public offering began, but sometimes big announcements (that will include big outlays) can sour things. For months, speculation among Tesla Motors fans and TSLA stockholders has been about where the company would choose to build its “Gigafactory” for batteries. The announcement was made on Thursday night that the factory would be built in Nevada.
When Tesla CEO Elon Musk made that announcement, he also mentioned that TSLA stock was “a little too high.” Musk has made similar statements before, and many analysts have agreed with him, though some question why the company’s CEO would tell the world that his stock is over valued. The announcement of the Gigafactory and subsequent stock questions, however, seemed to have had a somewhat negative impact on the TSLA standing, giving it a dip of about 0.9 percent Friday.
The Street reports that, when asked about TSLA’s price on Thursday, Musk said those thinking long-term will find the then-current price to be good, but short-term investors would probably not be attracted to the TSLA numbers.
“I think our stock price is kind of high right now.”
Although TSLA stock did dip, it may not have been due to the company CEO’s statements. The announcement of the new Gigafactory, projected to cost nearly $5 billion, could have also been a sour note to investors, especially in regard to the type of haggling states were doing to attract Tesla and their new battery factory.
Governor Jerry Brown of California, reports Torque News, stated that he ended negotiations with Tesla Motors when the “price” of incentives to get them to stay there with their Gigafactory reached $1 billion. Nevada reportedly offered $1.3 billion in cash and incentives to get Tesla to build there. Fox Business reports the Nevada number as being $3 billion.
Tesla itself has been experiencing the cash burn that most start up businesses struggle with in their early years. Tesla began just 10 years ago and has only had products for the past seven and has yet to show profitability, though it had become sustainable in most investors’ eyes by the time its initial public offering on Nasdaq for TSLA stock opened to high interest in 2010.
Yet earnings reports from TSLA show that the company is anything but profitable, with about $2.6 billion in cash value and $4 billion in liabilities. Tesla’s overhead costs are increasing by about 20 percent this year and development expenses are jumping by about 30 percent. Tesla posted losses of $582 million from January 2012 to June 2014.
Yet for all the talk of Tesla’s downturn, TSLA is still valuated at $35 billion. while its much larger and more well-established competitor, General Motors, is valued by Wall Street at $55 billion.