Over the course of June 12 and June 13, Elon Muck bought just over 72,000 shares of Tesla (NASDAQ: TSLA) each priced between $342,775 per share to $347,001. The purchase would seem to be a vote of confidence in the tattered electric car company plagued by financial concerns and the slow release of a major product.
Recently, Musk said that, after several delays, Tesla will begin to build 5,000 of its inexpensive Model 3 vehicles per week. At one time, Tesla had 400,000 back orders. Musk’s statement about production was tentative, so skeptical investors have either withheld their judgments, or said outright Musk is too optimistic, Even if he is correct, Tesla’s production will need to rise much higher for the car to be a financial success.
The Model 3 is Tesla’s inexpensive offering to the market. Most of the versions of its current models cost over $70,000 and in some cases well over $100,000. The Model 3 will be priced at $35,000 which optimists about the company believe will turn it into a mainstream manufacturer. It is still a guess as to whether there will be mass market demand for the car.
Recently, Musk dodged a shareholder attempt to break apart the chairman and CEO roles. He still faces pressure from major institutional shareholders to get quickly to profit. Outside financial experts believe Tesla will need to raise money to break even, and perhaps raise that money this year.
Musk is extremely wealthy. The share purchase could be seen as a selfish way to protect the value of his much larger stake in the company. However, on balance shareholders should look at the decision as positive.
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