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Elon Musk: On Tuesday, shares of Tesla, the top producer of electric vehicles, fell 8% and hit a new 52-week low.
Elon Musk, the CEO, attributed the decline to macroeconomic factors.
The news
Tuesday’s market performance was mixed as Tesla shares slid to a 52-week low and finished at approximately $138 per share, down 8%.
Elon Musk tried to attribute the problem to macroeconomic factors.
Ross Gerber, a longtime backer of Tesla, tweeted:
“Tesla stock price now reflects the value of having no CEO. Great job tesla BOD – time for a shake up. $tsla.”
Gerber launched an unofficial campaign to convince Tesla’s stockholders to ratify his appointment to the board of directors.
“As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are not guaranteed,” Musk replied.
“People will increasingly move their money out of stocks into cash, thus causing stocks to drop.”
Stock
Since Musk said earlier this year that he would buy Twitter, Tesla’s stock has fallen more than those of other well-known manufacturers.
Tesla shares have dropped 59% since April compared to 26% and 12% for Ford and GM, respectively.
The S&P 500 is down 14% as well.
Distractions
Elon Musk, according to Ross Gerber, has been preoccupied.
He mentioned the issues that the new CEO and owner of Twitter had been causing with his social media site.
Late in October, Musk used a leveraged buyout to acquire Twitter.
As CEO of SpaceX, a large defense contractor, he also spends his time between those roles.
Read also: Elon Musk sells giant chunk of Tesla shares again
Twitter acquisition
Elon Musk sold his Tesla stock, including one, for $3.6 billion earlier in December to obtain money to buy Twitter.
In an effort to “save” the company last month, he laid off more than half the workers after selling his Tesla for billions of shares.
Then he made a number of modifications to the products and the policies, which he ultimately undid.
After layoffs, Musk called an all-hands meeting to motivate the remaining Twitter employees.
He sold Tesla stock, estimated to be worth $3.95 billion, at the start of November.
Musk also sold 19.5 million more Tesla shares, according to a filing sent to the Securities and Exchange Commission.
In April, Musk sold Tesla shares worth over $8 billion, and in August, he sold stock worth over $7 billion.
The CEO of Tesla extended an invitation to employees from previous companies he co-founded to join the Twitter team, as well as to supporters, friends, and autopilot engineers.
Tesla’s challenges
Since late October, Elon Musk has been focusing on his “Chief Twit” position.
Tesla has been offering discounts and incentives to sell automobiles in China, where the company has a sizable production site in Shanghai.
Additionally, the company has pushed to improve productivity in recently built facilities in Brandenburg, Germany, and Austin, Texas.
Additionally, despite Europe’s growing energy prices, Tesla continues to experience supply chain problems in the automotive industry.
The scenario in Europe may reduce drivers’ interest in electric automobiles.
Price targets
Due to the issues the company is now having, Mizuho Securities and Evercore ISI decreased their projections for the price of Tesla on Tuesday.
Analysts at Mizuho Securities warned of “potential weakness in Tesla sales as macro headwinds and a weaker consumer could drive lower demand for higher-priced EVs.”
The company, however, is upbeat about Tesla’s future and cites the following factors as potential boosters of rising domestic demand:
- New Tesla factories could provide a competitive advantage
- New electric vehicle tax credits in the United States
Early in 2023, China’s EV credits start to run out.
As a result, the group has a buy rating and a $285 price objective on Tesla’s shares.
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Tesla shares
Joshua White, an assistant professor at Vanderbilt University and a former economist for the US Securities and Exchange Commission, said:
“Only some of the drop in Tesla’s value can be blamed on interest rates. Twitter overhanging is one important component. China is another huge component.”
“We still don’t know if China will be open all the way, and we see there is supply and demand pressure here in light of the increase in Covid cases and disruption.”
White asserts that Elon Musk likely lost shareholders’ confidence in April when he said he didn’t sell any extra Tesla shares.
Musk persisted nonetheless, raising billions of dollars by selling more shares.
“He seems to sell equity in really large blocks, say ‘I’m done and I’m not selling anymore.’ But talk is cheap,” continued White.
“He says that and then sells more shares. So the more you say that and investors think he’s probably not done? The less confident they will be that the price is going to bounce back.”
References:
Elon Musk tries to explain why Tesla shares are tanking
Elon Musk tells Twitter staff he sold Tesla stock to save the social network
