Hold the Phone -- Tesla Didn't Make a Profit Selling Cars
But it lacks the one thing its investors want: a profit -- from selling cars.
Let's get one thing straight from the start. I'm a fan of Tesla's CEO Elon Musk, Tesla Motors, Nikola Tesla, and even PayPal, a unit of eBay
I love the name that was selected to brand the car and company. Nikola Tesla was one of the greatest geniuses of all time. He isn't well known, certainly not as well as Thomas Edison, but he arguably gave the world a better understanding of the many uses of electricity than Edison did. In fact, it appears the Tesla light bulb will remain in active service around the world longer than Edison's. (Tesla invented the florescent light bulb.)
Even more obscure than Nikola Tesla is Tesla Motors' quarterly profit, which has received tremendous attention lately. Reuters reported adjusted earnings of 12 cents per share, or about $14 million, from $562 million in sales. Business Insider's Sam Ro wrote, "In other words, the market has concluded that Tesla is the real thing."
Fantastic news for sure, and faster than you can say "zero to 60 in 4.2 seconds," the price of the stock jumped 50%. Am I the only one who read the quarterly report? Because it doesn't appear that Tesla is making money, at least from automobile manufacturing. The reaction of the stock is a different story altogether.
I recently wrote Slow Down Tesla, Curves Ahead, an article pointing out that short interest is positively charged at more than 45% of the float. For those of us with investor high mileage (and the gray hairs to go along with it), the first thought to come to mind is "short squeeze".
At a certain point, it doesn't make one iota of a difference why a stock is trading higher, short-sellers have a limited amount of pain tolerance and once that point is reached, the short position needs to be covered.
Once you have enough short interest in a stock, it's like a stick of dynamite. All it takes to light the fuse is a positive news event and the wheels are set in motion.