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Photo Illustration: Sarah Grillo/Axios. Photo: Jörg Carstensen/picture alliance via Getty Images

Tesla stock has been in Ludicrous Mode for the past few days. Given its bonkers gyrations, it's now easy to see why CEO Elon Musk might feel that he was right all along in wanting to take the company private back in 2018.

"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone."
— Elon Musk, "Taking Tesla Private" blog post, August 2018

How it works: Tesla's rising share price this year has been good for Musk's pay package and his wealth, but it has also turned the stock into an arena for short-term, high-stakes gamblers.

  • In the first three days of this week, $157 billion of Tesla stock changed hands. For gamblers, it was more popular than Bitcoin, which saw $96 billion of volume in those three days. Tesla even approached the $198 billion of volume in SPY, the benchmark S&P 500 ETF that's the most popular playground for day traders.
  • Compare Apple, with its awesome $1.4 trillion valuation: It had $107 billion in volume over three days, much less than Tesla, which is worth roughly a tenth as much.
Expand chart
Chart: Axios Visuals

The stock market is failing at its primary role of price discovery, the determination of how much securities and companies are worth. There's no rational reason — and certainly no news — explaining why Tesla's value should have fluctuated by more than $20 billion per day.

  • This wasn't a short squeeze like the famous VW run-up in October 2008, when the German carmaker briefly became the most valuable company in the world. In that case, the quantity of shares available to buy was much lower than the amount that short sellers had sold. But in this case, even if all the Tesla shorts were forced to cover their positions at the same time, that would account for less than one day's trading volume.
  • Other possible explanations like delta-hedging call-option volume (don't ask) similarly can't come close to explaining the magnitude of the price swings and high volume that Tesla stock is seeing.

Be smart: A stock that can melt up for no particular reason can just as easily melt down.

When the share price is as volatile as this, valuation feels more like a sugar high than the true wisdom of the crowds, and a buy-and-hold strategy feels like utter foolishness. Hedge fund manager Cliff Asness has argued that the price opacity of private markets has significant positive value. If that's the case then Tesla in particular should probably be private.

Flashback: Musk said in 2018 that he wanted to take Tesla private at $420 per share, which corresponded to a valuation of $76 billion. At the time, that was a significant premium to the open market price.

  • The bull case for Tesla is predicated on the company raising another $10 billion in equity capital, plus possibly much more than that in debt. Public investors don't like that kind of dilution, but a private investor willing to buy the company for $76 billion in 2018 would probably be happy to put another $10 billion in right now.

The bottom line: If Tesla is going to be a vehicle for speculators, it should be one in which they sit behind the wheel, rather than one they buy on the Nasdaq.

Go deeper

Using apps to prevent deadly police encounters

Illustration: Sarah Grillo/Axios

Mobile phone apps are evolving in ways that can stop rather than simply document deadly police encounters with people of color — including notifying family and lawyers about potential violations in real time.

Why it matters: As states and cities face pressure to reform excessive force policies, apps that monitor police are becoming more interactive, gathering evidence against rogue officers as well as posting social media videos to shame the agencies.

Dan Primack, author of Pro Rata
11 hours ago - Technology

TikTok gets more time (again)

Illustration: Aïda Amer/Axios

The White House is again giving TikTok's Chinese parent company more to satisfy national security concerns, rather than initiating legal action, a source familiar with the situation tells Axios.

The state of play: China's ByteDance had until Friday to resolve issues raised by the Committee on Foreign Investment in the U.S. (CFIUS), which is chaired by Treasury secretary Steve Mnuchin. This was the company's third deadline, with CFIUS having provided two earlier extensions.

Federal judge orders Trump administration to restore DACA

DACA recipients and their supporters rally outside the U.S. Supreme Court on June 18. Photo: Drew Angerer via Getty

A federal judge on Friday ordered the Trump administration to fully restore the Deferred Action for Childhood Arrivals program, giving undocumented immigrants who arrived in the U.S. as children a chance to petition for protection from deportation.

Why it matters: DACA was implemented under former President Obama, but President Trump has sought to undo the program since taking office. Friday’s ruling will require Department of Homeland Security officers to begin accepting applications starting Monday and guarantee that work permits are valid for two years.

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