How to buy, sell and short Tesla shares

How to buy and invest in Tesla shares

You can buy Tesla shares by derivatives trading. Derivatives trading is slightly different, because with products such as CFDs, you can speculate on Tesla’s share price increasing without having to take direct ownership of the shares themselves. Follow the steps below to either invest in or trade Tesla shares:

Not sure about which is best for you? Learn more about the differences between trading and investing.

How much would it cost to invest in Tesla?

IG’s best commission is available to active clients who place three or more trades a month. Or, rather than investing in Tesla and taking ownership of the shares directly, you can also speculate on the Tesla share price with financial derivates. You’ll be able to:

• Get full exposure with a small deposit – usually just 20%-25%¹ of the full value of the trade

How to sell and short Tesla shares

After investing in Tesla, the time might arise when you wish to sell your stake if the price starts to fall. Equally, you might want to short Tesla shares if you are trading with CFDs, in order to speculate on the price falling and perhaps generate a profit. Follow the steps below to either sell or short Tesla shares:

Tesla’s live market prices

Trading Tesla with CFDs

A contract for difference (CFD) is a contract where you agree to exchange the difference in the price of Tesla stock from when you open your position to when you close it. To go long on TSLA shares, you would buy the market. To go short on TSLA shares, you would sell the market.

Trade Tesla pre-market and after hours with IG

IG offers pre-market and after-market trading on US shares, enabling you to trade outside the normal window of 2.30pm to 9pm (UK time).

Our hours for trading US shares are from 9am to 1am (UK time) Monday to Thursday, and 9am to 10pm on Friday.

Learn more about IG’s extended hours on US stocks

Understanding Tesla: a brief history

Tesla was founded in 2003 by Marc Tarpening and Martin Eberhard. The pair financed the company themselves until Elon Musk joined the board of directors in February 2004 after a $7.5 million investment. Both Tarpening and Eberhard subsequently left the company, and Musk eventually became the chief executive officer (CEO).

Initially, the company was known as Tesla Motors, but that name was changed to its current name of Tesla Inc. in 2017. The name change reflected a shift in Tesla from being just a car manufacturer to an energy company as well. Aside from making cars, Tesla also manufactures energy storage equipment with the aim of improving energy production systems and electric travel around the world.

Tesla held its initial public offering (IPO) on 29 June 2010 in which 13.3 million shares were offered at an initial price of $17 per share. When markets closed on the first day, Tesla shares had increased in value by 40.53% to $23.89.

Tesla shares: the basics

Tesla shares are listed on the NASDAQ exchange and it trades under the ticker TSLA . It is a component of both the NASDAQ 100 and Russell 1000 stock indices. The share price is determined – as with all shares – by the relationship between buyers and sellers on the market. If buyers are dominant then the share price will likely rise and if sellers are dominant, the price will likely fall.

The balance of buyers and sellers is often influenced by Elon Musk’s media profile and public behavior. For example, share prices rallied in August 2018 after he tweeted that he was ‘considering taking Tesla private at $420 a share’, although this never came to fruition. On the other hand, share prices fell after he was videoed smoking cannabis and sipping whisky as part of a radio interview.

Tesla key personnel: who manages the company?

The Tesla board has 11 members, with the wider company management being comprised of 14 people, including its chief financial, technical and accounting officers. Board members are indicated with an asterisk in the below table.

Tesla boasts a particularly strong roster on its board, including James Murdoch – son of newspaper magnate Rupert Murdoch – and Larry Ellison, who is one of the top ten wealthiest people in the world.

What is Tesla’s business model?

Tesla’s business model is slightly different to some other car manufacturers. For one, Tesla does not sell its cars through franchised dealerships. Instead, Tesla operates with direct sales through a large web of international showrooms which are largely located in major cities around the world. Because it owns its own sales rooms, Tesla creates a unique and tailored customer experience, which is an integral part of its brand.

In the long run, Tesla’s business model is to accelerate the advent of sustainable transport by bringing compelling mass market electric cars to market as soon as possible.

Tesla fundamental analysis: how to analyse Tesla

Before you choose to buy or sell Tesla shares, it is important to carry out a fundamental analysis of the company to assess whether the shares are currently overvalued or undervalued. Once you have carried out your assessment, you can decide whether you wish to buy or sell.

Traders carry out fundamental analysis by studying a company’s financial statements including its profit and loss statement, among other things. However, fundamental analysis also relies on external factors which could affect the value of a market such as how in demand Tesla cars currently are and whether people are still more interested in buying petrol over electric cars.

Tesla’s price-to-earnings ratio

Tesla’s stock value can be measured by looking at its price-to-earnings (P/E) ratio. Essentially, it explains how much you’d have to spend on Tesla shares to make $1 in profit. If a company has a high P/E ratio compared to its competitors, then it could be indicative that its stock is overvalued.

The P/E ratio is calculated by dividing the market value per share by the earnings per share. The earnings per share are calculated by dividing the total company profit by the number of shares it has issued.

Tesla’s relative dividend yield

Dividend yield is a comparison of the company’s annual dividends – the portion of profit paid out to shareholders – to its share price. The relative dividend yield is the dividend yield of a single stock compared to that of the entire index. In Tesla’s case, this is NASDAQ.

To calculate Tesla’s relative dividend yield, first calculate its dividend yield by dividing its annual dividend by the current share price. Next, divide the dividend yield by the average dividend yield for the NASDAQ. A low relative dividend yield could suggest that the shares are overvalued when measured against competitor shares. Tesla has never issued dividends to its shareholders, because its current business model is to reinvest any earnings for future growth.

Tesla’s return on equity

Tesla’s return on equity (ROE) measures return on shareholder capital. ROE is expressed as a percentage and can be calculated by dividing a company’s net income by stakeholder equity. A low ROE could be an indicator that a company’s shares are overvalued. This is because, a low ROE would show that Tesla is not generating a lot of income relative to the amount of shareholder investment.

Footnotes

¹ Deposits for leveraged trades are 20%-25% on 99.77% of tier one US shares.