Tesla hits $100bn market valuation in auto industry milestone

The company’s shares are rising due to strong annual vehicle deliveries and increased production in its China factory.

A China-made Tesla Model 3 vehicle is seen at a delivery ceremony in the Shanghai Gigafactory of the U.S. electric car maker in Shanghai, China December 30, 2019
The rise of Tesla's market value puts CEO Elon Musk a step closer to earning the first $346m tranche of options in a record-breaking pay package [File: Yilei Sun/Reuters]

Tesla Inc surged in Wednesday’s trading and the company became the first publicly listed United States-based automaker to cross $100bn in market valuation, more than Ford Motor Co and General Motors Co combined.

Shares of the electric carmaker were up 8.1 percent at $591.78 in late-morning trading, continuing their robust rally that has more than doubled the share price in the last three months.

It “speaks to the inflection in electric vehicle demand globally,” Wedbush Securities analyst Daniel Ives wrote in an email.

“The skeptics have been proven wrong, and the $100bn market cap is sending the bears into hibernation mode,” Ives said.

The milestone comes less than a month after Tesla’s stock crossed $420, the price at which chief executive officer Elon Musk had tweeted he would take the electric carmaker private.

Musk in August 2018 tweeted that he had “funding secured” to take the company private when its shares were trading in the mid-$330s, only to later give up under investor pressure and regulatory concerns.

“The liquidity concern for now is off the table, and that opens up the … base to new investors,” said Ben Kallo, senior research analyst at Robert W. Baird & Co, which on January 9 downgraded its rating of the stock to neutral.

A higher stock price also helps attract employee talent, Kallo said, noting “In a technology sector where it is very hard to recruit and retain employees, especially in the Bay Area, the stock price helps.”

Tesla’s market value also puts Musk a step closer to earning the first $346m tranche of options in a record-breaking pay package.

The $100bn market capitalisation needs to stay for both a one-month and six-month average in order to trigger the vesting of the first of 12 tranches of options granted to Musk to buy Tesla stock.

The recent rally in Tesla’s shares was fuelled by a rare quarterly profit in October, news of production ramp-up in its China factory and better-than-expected annual car deliveries.

In a bullish report Wednesday, Wedbush analysts said that robust demand in China and Europe alongside the “aggressive” trajectory of Gigafactory 3 production will boost fourth-quarter earnings. Wedbush has a neutral rating on the stock.

Tesla is set to report its earnings on January 29 after markets close.

Source: Reuters