Bursting of Tesla bubble a case of ‘not if, but when’

Stocktake: Tesla took fewer days to return 2,000% than technology bubble in the 1990s

  Tesla  CEO Elon Musk  with Tesla China-made Model 3 vehicle owners onstage during a delivery event at its Shanghai factory in China in January. Photograph: Reuters

Tesla CEO Elon Musk with Tesla China-made Model 3 vehicle owners onstage during a delivery event at its Shanghai factory in China in January. Photograph: Reuters

 

How big is the bubble in Tesla shares? Big – among the biggest in recent stock market history, according to Bespoke Investment. It notes Tesla has taken fewer days to return 2,000 per cent than the technology bubble in the 1990s.

Similarly, the pace of Tesla’s gains exceeds the huge gains seen in homebuilding stocks in the early 2000s and biotech stocks from 2009.

The history of “parabolic” moves like this indicates the stock will “run out of steam and suffer a dramatic short-term fall at some point”.

Market dislocation

ETH Zurich’s Financial Crisis Observatory, best known for its association with risk scientist and bubble expert Prof Didier Sornette, goes further in its latest monthly global bubble status report. Tesla’s “ballistic” share price performance is “another symptom of market dislocation”, the report says.

“Weak fundamentals, high valuation and lots of exciting good news: it is a typical dotcom-like bubble and very dangerous for short-sellers”. Most bubbles end in an “acceleration phase” but every bubble inevitably bursts. With Tesla, this is a case of “not if, but when”.

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