Tesla benefited from government stimulus

Bloomberg

Elon Musk, whose Tesla Inc. was a major beneficiary of government stimulus in the wake of the last global financial crisis, has soured on the concept.
The outspoken chief executive officer of both Tesla and US government contractor SpaceX tweeted that “another government stimulus package is not in the best interests of the people,” in his opinion.
A decade before Tesla became the world’s most valuable automaker by market capitalisation, the company survived the Great Recession by the skin of its teeth — in Musk’s own words — thanks in part to a $465 million federal loan to design electric vehicles and build them in Fremont, California. The company then went public, repaid the loan early and now employs about 20,000 people in the Bay Area alone.
Before Tesla obtained the federal loan, Musk was clear: without government support, the company — then a boutique maker of a $109,000 sports car — would have to delay rollout of a less expensive electric sedan.
“We can’t move forward with that without a major amount of capital,” the CEO said in a December 2008 interview. “If we don’t get any government funding then what we need to do is we need to wait until the capital markets recover, which could be a year or two years from now.”
Congress is now working on another stimulus package to help revive a US economy ravaged by the pandemic.

Tesla sinks
Investor euphoria around Tesla Inc. shares succumbed to gravity, with one of the biggest catalysts behind automaker’s recent rally now done and dusted. Tesla shares dropped as much as 9.7% to $1,366.54 in New York, its lowest intraday price since July 8. The stock has lost 14% since the company delivered stronger-than-expected earnings.
Shares of the company had risen 280% this year, reflecting the possibility of a fourth consecutive quarterly profit, an inclusion into the S&P 500 Index, entry into new markets and pending announcement of better battery technology. The biggest driver out of them all was the second-quarter profit, since it would open the door to the S&P 500.
Actual inclusion into the index, however, is not considered imminent. An S&P Dow Jones Indices spokesman has said the index isn’t reconstituted on a pre-determined timeline, and that companies that meet the eligibility requirements are not automatically added. In any case, analysts believe the stock’s lofty valuation already reflects the potential for an inclusion.
With two big catalysts for the stock’s meteoric rise having passed, many expect the valuation to take a hit.
“We struggle with Tesla’s valuation, which essentially appears to discount world domination, and we suspect the stock will be particularly vulnerable to any market-wide factor rotation back to value or hiccup relative to expectations,” Sanford C. Bernstein analyst Toni Sacconaghi wrote to clients on July 23.