The stock had tumbled between sessions as investors reacted to federal safety officials opening an official preliminary investigation into fires in Tesla's luxury electric cars.
Investors quickly decided it was an overreaction and began bidding up the price, after an initial dip at the open. Shares were trading up 5% to $127.60 at midday.
FEDERAL PROBE: Feds open preliminary Tesla investigation
Tesla CEO and founder Elon Musk says coverage of several recent high-profile fires in the Model S has unfairly tarred Tesla.
In a post on the company's blog, he wrote, "Since the Model S went into production mid last year, there have been over 400 deaths and 1,200 serious injuries in the United States alone due to gasoline car fires, compared to zero deaths and zero injuries due to Tesla fires anywhere in the world."
Drivers of the three Model S Teslas, which caught fire after hitting road debris, were unhurt, and praised the cars for helping them escape injury.
Karl Brauer, senior analyst at Kelley Blue Book auto researcher, says: "While only three Tesla fires have occurred, that's three more than I'm aware of for the Nissan Leaf, which has sold in greater numbers while being on the market longer.
"Is there an inherent design flaw in the Tesla's battery pack that makes it more prone to fires compared to other electric cars? That's what NHTSA will be determining."
The National Highway Traffic Safety Administration's preliminary investigation is a first step to see if there is an obvious fault, or something that bears further investigation in what'! s called an engineering analysis.
Preliminary investigations seldom lead to mandatory recalls, though they sometimes unearth obvious flaws that an automaker will correct promptly.
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