Counterparties: Tesla stock goes vroom!

May 9, 2013

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It’s been a big week for Tesla: The electric car maker announced yesterday that the company turned a profit last quarter for the first time in its history, while saying it would stop regularly releasing the number of reservations it has taken for its cars. That means the market will lose the data it had be using as a metric for measuring electric car demand.

Tesla’s results came as Consumer Reports gave the Model S a rating of 99/100 – the first time a car has achieved that rating since 2007. The company’s stock shot up 24% overnight.

Tesla’s surging share price might not have all that much to do with its quarterly results. Rather, it looks like a classic short squeeze: in early April a whopping 60% of all tradeable Tesla shares had been sold short. Those shorts are in a world of pain right now, and the stock will probably just continue to rise until they capitulate and cover at a massive loss. It’s beginning to look a lot like the Porsche/Volkswagen short squeeze back in 2008. Here’s the Tesla stock chart, since its IPO:

There is more to the Tesla story than just stock-market fun and games. Being environmentally friendly is an incredibly lucrative business right now in the auto industry. According to the LA Times, “Tesla’s earnings were enhanced by sales of environmental credits to other automakers; these credits are awarded to clean vehicle makers as part of California’s efforts to reduce air pollution. Sales of the Zero Emission Vehicle credits generated $68 million in revenue for Tesla in the quarter.”

The company is also profiting on its renewable fuel credits, according to Izabella Kaminska, because of a US law that requires refiners to blend more biofuel into their gas each year, or buy what are known as RIN credits. Because older car models don’t run well enough on the amount of biofuel that will soon be required in gasoline by law, all American refiners and fuel importers have to buy RIN credits, which Tesla is happy to sell them. – Shane Ferro

On to today’s links:

China is running out of ways to grow  – Quartz

Crisis Retro
With a $59 billion dividend, Fannie Mae will help the US avoid the debt ceiling (for a few months) – WSJ

100,000 homeowners received national mortgage settlement checks for the wrong amount – NYT

Crime And/Or Punishment
Phil Falcone has agreed to a loophole-ridden 2-year ban from the financial industry – DealBook

If hedge fund managers are so smart, how come they can’t beat a basic index of stocks and bonds? – Matthew O’Brien

Most nights, Netflix accounts for one third of all web traffic in North America – Businessweek

Austerity Bites
Without austerity measures, US unemployment would be 1% lower and growth would be 2% higher – NYT

Politico is testing a pay wall – Michael Calderone

Data Points
The problem with the latest bull market: just 52% of Americans own stocks – NYT

And, of course, there are many more links at Counterparties.


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