Tesla’s share price hasn’t been on a roller coaster since February. The good news for the first time in four consecutive quarters of earnings, just after the second-quarter results yesterday, sent Tesla’s shares up 6 per cent after the session, but fell nearly 5 per cent today. The trend even prompted warnings and statements from the Securities and Exchange Commission.
Jay Clayton, the SEC chairman, said on July 23rd that he was concerned about the surge in some stock prices caused by short-term speculative trading by retail investors.
Tesla just released its second-quarter results on July 22nd, and Clayton issued the warning the following day that short-term speculation and retail pursuits in the U.S. stock market have long caught the attention of regulators, and investors have to be alarmed and ponder the potential consequences.
Asked by CNBC whether regulators had noticed a recent surge in the share prices of several companies, including Tesla, Clayton replied: “The SEC believes that investors should be long-term investors, investing over time and adjusting their positions once a month; Does that worry me? Of course. “
Clayton believes that this is more of speculation than real investment, and that the risk of trading is much higher than long-term investments, which is the main reason for his concern. He added that the SEC had issued guidance to stockbrokers and investment advisers on how to provide retail investors with better risk warnings.
Although Clayton did not name Tesla, Tesla is undoubtedly one of the most high-profile and controversial stocks in the U.S. stock market this year, and perhaps not, and the huge boost that retail investors have played in Tesla’s rally is also evident.
Tesla is one of the most sought-after stocks on Robinhood, the US’s retail-focused zero-commission trading platform. On Monday, July 14, about 40,000 Robin’s accounts bought Tesla’s stock, a 16 percent jump on the day before quickly retreating to close the day down 3 percent.
Tesla’s quarterly report yesterday showed the company posted its first consecutive quarterly profit, jumping 6 per cent after the session. However, after the opening bell today, the share price fell all the way, eventually falling 4.98 per cent to close at $1,513, significantly below the pre-quarterly share price.
Institutional investors who think Tesla’s current valuations are inflated are not in the minority. As Tesla’s share price soars, the bears’ beliefs have become even stronger, even if they have suffered huge losses. And it’s not just Tesla’s share price that is worrying, but the huge risks it reflects on the current U.S. stock market are all the more worrying.
Anne Walsh, chief investment officer at Guggenheim Fixed Income, told Sina Financial that the U.S. market is now driven by giants such as Apple and Tesla, while many small-cap companies are far outperforming the broader market, a development that is often a sign of asset bubbles.
The Nasdaq 100, for example, leads the six big technology stocks – Apple, Microsoft, Amazon, Alphabet, Google, Facebook and Tesla – accounting for almost half of the index’s market capitalisation. Other broad-cap indices, such as the Standard and Poor’s 500 Index, have shown the same phenomenon and trend, indicating a continued decline in the narrowness of the U.S. stock market.
Even among the giant tech stocks that led the rally, Tesla was the craziest. Shares surged 56 per cent in early February in a week, before falling almost in the red. Tesla’s share price has more than tripled since april, surpassing Toyota’s market capitalisation and ranking first among global automakers. However, Toyota delivered 10.72 million vehicles in 2019 and Tesla delivered 368,000, less than Toyota’s.
JMP Securities, one of Tesla’s most committed on Wall Street, also downgraded Tesla to “market balance” ahead of this week’s quarterly results, saying the rally in Tesla’s stock looks unsustainable. Earlier this month, Goldman Sachs and Morgan Stanley also downgraded Tesla.
Tesla is one of the most typical examples of a bubble in the us share boom, driven by unprecedented liquidity at the Federal Reserve, and Tesla is one of the most typical examples of this bubble, ” said Sina Financial, the chief investment officer of a New York hedge fund. He said his hedge fund had started shorting Tesla this month.
The executive explained that the current rally in U.S. stocks was driven mainly by liquidity and frenzied market sentiment released by the Federal Reserve, while the fundamentals of the U.S. economy continued to deteriorate and hopes of a V-shaped recovery were fading. In this case, the deepening of the economic crisis will force the U.S. stock market to eventually pull back to fundamentals. Now the bigger the “bubble” the Fed injects, the more investors will pay.
Wen/ Sina Finance Wei Tianxuan.