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Tesla Motors Inc (TSLA) Shares Recover From Four-Month Low after a ‘Ludicrous’ Rally

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Tesla stock abruptly shakes off negative sentiments and recovers some of its loses from Solar merger deal

Tesla Motors Inc (NASDAQ:TSLA) announcement to acquire its struggling, sister company SolarCity Corp (NASDAQ:SCTY) hit the Street like a lightning bolt last week. While Tesla bulls greeted the news with reservations, the bears found an opportunity to take a jab at Elon Musk, CEO at Tesla and Chairman at SolarCity, for his “no-brainer” proposal.

The shares of the automaker declined dramatically, more than 14% over the last year trading session and hit a roughly four-month low of $187.87 during early trading hours on Monday. Though, in the afternoon, the shares suddenly went into a ‘Ludicrous’ mode and accelerated by about $10. By 3:14 PM EDT, the shares were trading up 1.2% at $195.47.

Almost every Street analyst criticized the move over various reasons, including more cash burn, different business model and target markets, capital market and financial risks, and limited synergies. Though one true Tesla loyalist, Trip Chowdry of Global Equities Research, applauded the automaker for such “industry-creation activity” and urged his clients to buy the stock on weakness.

The Wall Street Journal published a report earlier today, indicating that Mr. Musk’s fans can save Tesla-SolarCity merger deal given the visionary leader’s reputation. The report said that most key outside Tesla shareholders are not new to the shares, as six of the seven largest investors (excluding Mr. Musk) have stake in the company for no less than three years and own more than two-third of the company.

Earlier this year, the largest investor in the group, Fidelity Investment, said that a solar company would be hand-in-hand with the automaker’s technology. Additionally, Mr. Musk has full confidence that the shareholders of both the company will approve the merger proposal.

Apart from the report, other news that could positively effect Tesla shares include filing of six new trademarks to sell solar products under the Tesla brand, sales of tax credits worth $20 million to MGM Grand Casino, and the Chinese governments intension to remove cap for foreign carmakers on joint-ventures.

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