You might say that Tesla Motors' honeymoon period as a public company is over.
The electric-car company's stock closed Monday down nearly 22 percent from where it was just two trading days earlier. Two main factors weighed down the stock: a Wall Street analyst who slapped a "sell" rating on it as well as concerns that the expiration Monday of a six-month ban on sales of stock by insiders would lead to a sell-off .
The stock's plunge was a quick reversal of fortune for a company that seemed to be leading a charmed life, and it points to the challenges ahead. To succeed, Tesla will have to quickly mature from a startup to a manufacturer that can market its cars to the mainstream while fending off competition from industry behemoths.
Monday's stock sell-off was excessive, but the sentiments it represented are rational, said CapStone Investments analyst Carter Driscoll, who was responsible for the "sell" rating. Tesla was priced at a stiff premium to comparable companies, despite the fact that its success is far from certain.
"Right now the risks outweigh positives," said Driscoll, who has no position in Tesla's stock and whose company has not done investment banking business for Tesla.
Many investors appear to agree. On Monday, Tesla's stock slumped 15 percent as investors traded 9.3 million shares. That was more than 10 times its recent daily average, and greater volume than on any day since Tesla's second day as a public company.
After the sell-off, shares in the Palo Alto company settled at $25.55, near the $22 price target Driscoll set on Tesla's stock last week in his pessimistic report.
The heightened trading came on the same day that the "lock-up" expired on shares that have been held by investors since before Tesla's initial public offering of stock. Those early investors, who own 79.8 million shares, or about 85 percent of Tesla's stock, were barred from selling any of those shares for six months after the company's IPO.
Inside investors are required to disclose sales of their company's stock soon after making a trade. However, those disclosures typically aren't made public until a day or two after they're made. As of Monday afternoon, Tesla officials hadn't filed any documents concerning such sales.
A Tesla representative declined to comment on the plunge in the company's shares or on whether the company knew of any insiders who sold Monday.
The stock's decline -- and Driscoll's report -- were a sharp reversal for a company that has had a remarkably positive initial period as a public company. In the six months since its IPO, Tesla's stock had more than doubled in price amid rising expectations and high-profile deals.
Last month, for example, Panasonic invested $30 million in the company. And in October, Tesla announced that Toyota will pay it about $60 million to help develop an electric version of Toyota's RAV4 sport-utility vehicle.
But the past several days have been a reminder that Tesla has some big challenges ahead of it.
Tesla's sole car to date is a limited-production roadster whose body it doesn't even manufacture. Its next model -- the Model S sedan -- is geared to a more mainstream audience, but Tesla will have to build the entire vehicle and do so in mass quantities.
"It isn't going to be an easy task," said Jesse Toprak, an analyst who covers auto industry trends for TrueCar.com, a car research site. "There are issues you encounter when you're producing 50,000 units that you don't when you're producing 1,000."
In order to succeed, the company will need to market its cars not just to receptive, environmentally conscious consumers in California, but also to mainstream, middle-class families in the Midwest, Toprak said.
And then there's the competition. Driscoll noted that a slew of full and partially electric vehicles will already be in dealer showrooms by the time Tesla expects the Model S to go on sale in 2012. And many of those other cars will carry a price far lower than the $57,400 Tesla plans to charge for the Model S.
Tesla is the first car company to have an IPO since Ford in 1952, and the highway since then has been littered with failed automobile startups, Driscoll added.
"I don't give (Tesla) the benefit of the doubt today like maybe some others have," he said.
To be sure, Tesla still has its believers. Among them is Doug Cheeseman, a Saratoga resident who bought 700 shares at the company's IPO. Cheeseman said he had a passing thought about selling some of them when Tesla's price neared $40 a share, but he opted not to and doesn't regret it, even with Monday's sell-off.
Cheeseman owns a Tesla Roadster, which he calls the "best car I've ever owned," and has friends who work at the company.
"I'm still really confident in it," said Cheeseman, who organizes safari tours to different parts of the world. "I still have this feeling -- it may be crazy -- that (Tesla's stock) will go up to $100."
Contact Troy Wolverton at 408-920-5021. Follow him at http://twitter.com/troywolv.