Tesla stock has fallen since Elon Musk acquired Twitter. Here’s why.
Tesla stock has fallen since CEO Elon Musk acquired Twitter, dropping more than 45% in about two months.
In all, the company’s stock has fallen more than 65% since January, when Musk began investing in Twitter. By comparison, the tech-heavy Nasdaq has fallen by about half over that period.
Musk said on Tuesday that he will step down as chairman of Twitter when the company identifies a successor. The news temporarily boosted Tesla’s stock before turning lower again.
The electric vehicle company is facing falling demand amid recession fears, increased competition and production challenges caused by the pandemic.
Moreover, some analysts and large investors have criticized Musk for a perceived lack of focus on Tesla, saying the company needs leadership as it deals with an adverse business environment.
“Musk is seen as a ‘sleeper at the wheel’ from a leadership perspective for Tesla at a time when investors need a CEO to navigate this Category 5 storm,” said Dan Ives, longtime Tesla bull and managing director of equity research at Wedbush. . Research note on Thursday.
“Instead, the laser catcher is focusing on Twitter which has been an ongoing, never ending nightmare for investors, with hopes of picking up a new CEO in the coming weeks as the first step forward,” added Ives.
Tesla did not immediately respond to a request for comment.
Aside from investor concerns about Musk, the company’s stock losses owe partly to rebellious rivals and slashed demand.
Tesla remains the best-selling electric vehicle company in the US, but its lead has slipped in recent months as competitors offer a host of more affordable alternatives, the SA & P Global Mobility Report showed last month.
The report found that the company captured 65% of the market share of new registered vehicles in the US during the third quarter of this year, down from 71% last year and 79% in 2020.
In response to weak demand, Tesla announced Wednesday that it will offer discounts of $7,500 on Model 3 and Model Y deliveries in the United States this month. Shares in Tesla fell nearly 9% the next day.
However, significant investor interest has been focused on Musk and his apparent focus on Twitter.
The world’s richest person has sold nearly $40 billion in Tesla stock since late last year, including a recent $3.6 billion sale last week that funded the Twitter acquisition.
The sales reduced the stake Musk owns in Tesla, raising questions about his level of continued involvement with the company.
Some major Tesla investors have called on Musk to put his primary focus on Tesla, which boasts a market capitalization of $392 billion, far greater than the value of Twitter, on which Musk has spent $44 billion.
“I think it is in the best interest of Tesla shareholders for Elon to return to Tesla to work full time,” Ross Gerber, CEO of Gerber Kawasaki Wealth investment management, chirp Sunday.
For his part, Musk has defended his actions on Twitter as part of an aggressive effort to save the company from financial risks, which he described in an interview on Twitter Spaces on Tuesday as “emergency fire drills.”
“This is the reason for my actions,” he added. “It can sometimes seem fake or weird or whatever.”
In an interview on Twitter Spaces on Thursday, Musk vowed to stop selling Tesla stock until at least 2024, even though he had previously breached his commitments to halt sales of the stock. He added, meanwhile, that he hasn’t missed “a single important Tesla meeting” since getting Twitter.
Musk also said Thursday that he expects the economy to fall into a “serious recession” next year, which will reduce demand for expensive goods.
This year is sure to hit automakers across the segment. Ford shares are down 45% in 2022; While General Motors shares fell 43% and Toyota 26%.
The Federal Reserve’s interest rate hike has pushed up borrowing costs, making it more difficult to buy cars for consumers already suffering from high inflation. Meanwhile, production bottlenecks caused by the epidemic and chip shortages continued, increasing costs and causing delays in delivery.
In recent months, declining consumer confidence has added pressure to the industry.
Despite these headwinds, Tesla can stem its financial hemorrhage and divert its business, Ives said, from Wedbush Securities.
He attributed nearly 70% of the decline in Tesla shares in recent months to Musk’s focus on Twitter, urging Musk to return his attention to the company and stop selling Tesla stock.
“Going back, the story of Tesla’s long-term transformation remains the same,” Ives said, adding that he expects global demand for electric vehicles to accelerate significantly over the coming years.
He said Tesla is “the clear leader poised to benefit front and center”.
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