Tesla Inc. : Concomitant victim of Musk’s Twitter excesses, Tesla never stops falling in the stock market

(BFM Bourse) — Shares in the electrics car maker lost 8% on Tuesday as research departments continually rethink their name, worried about Elon Musk’s Twitter scatter. The stock has lost about 40% since the takeover was completed.

Is there still a pilot on board the Tesla? The market seems to doubt this more and more. Hardly a day goes by without Elon Musk, co-founder and current CEO of the automaker, making headlines with some controversial new idea for Twitter.

A South African businessman recently “lost” a poll asking whether he should remain at the helm of the social network, which he completed a $44 billion acquisition in late October.

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On Tuesday evening, Elon Musk assured that he would step down as CEO of Twitter as soon as he found someone “crazy” enough to replace him. This is a few days after the suspension of journalists’ accounts or even the announcement of a ban on publications containing links to other social networks.

While Elon Musk seems to be focused on Twitter, Tesla shares are certainly not slow on their stock market agony.

Sale of shares

Thus, the title fell 8% to $139.07 on Tuesday. Since the end of October and the completion of the Twitter takeover, the stock has lost 40%, while the S&P 500 has fallen only 2%. Going back to April, when the soap opera about the acquisition of the social network by Elon Musk began, the drop exceeded 60%.

Market fears are numerous. One of them remains that Musk continues to sell shares of Tesla to ease the finances of the debt-ridden social network. According to Bloomberg, Twitter currently has to pay $1.2 billion in annual interest.

Last week, the entrepreneur sold another $3.6 billion worth of Tesla shares, bringing the total since April to over $22.5 billion. By November, Musk had already sold about $4 billion. “Musk’s continued selling after repeated assurances that he’s finished dumping Tesla stock reflects growing pressure on Twitter’s finances,” Bloomberg said.

And of concern is Musk’s (alleged) lack of involvement with Tesla. Ross Gerber, director and founder of investment firm Gerber Kawasaki, took the liberty of tweeting. An investor known for his confidence in Tesla said the automaker’s share price reflected the fact that it “didn’t have an executive director” at the automaker. He also urged the group to communicate Elon Musk’s succession plan and reach an agreement with the billionaire that would better know his intentions regarding his current stake in Tesla, which is about 13%. Which obviously did not please the billionaire, who suggested that Ross Gerber go back and “read” his old financial guide.

“Damaged” trust

Except that Ross Gerber is obviously not the only investor concerned about Tesla’s lack of leadership. Last month, Bloomberg reported on the dissatisfaction of the automaker’s shareholder Trevor Goodwin, who almost completely sold his stake in Tesla, denouncing Elon Musk’s mistakes on Twitter. “It’s like he’s given up on us for his new mission,” he complained.

According to Reuters, Daiwa Capital Markets on Tuesday lowered its Tesla price target to $177 from $240 earlier, citing a “higher risk profile due to Twitter distraction.” Other research firms lowered their stock forecasts on Tuesday, including Mizhuo and Evercore ISI.

Oppenheimer’s bank downgraded Tesla from “excellent” to “efficient” on Monday. According to CNN, the research office concluded that Elon Musk’s actions on Twitter, in particular his decision to block journalists’ accounts, “seriously undermined” investor confidence in Tesla.

“We believe that the ban on journalists without [fondements] justifiable arguments or no clear communication in an environment where many people believe free speech is under threat “is too strong a decision” for most consumers to continue to support Elon Musk/Tesla, especially those ideologically linked to climate change mitigation.” . developed by Oppenheimer. The design bureau also saw Elon Musk as “increasingly isolated.”

“Twitter Circus”

Since his takeover of the social network, the businessman has taken over Twitter by installing himself as CEO, firing many employees and making a number of sometimes questionable strategic decisions. Thus, Musk’s brutal choice exposed a brutal corporate culture that could tarnish Tesla’s image.

Three-quarters of the institutional investors surveyed by the bank believe the Twitter situation contributed significantly to Tesla’s recent plunge, according to a late-November poll by Morgan Stanley.

Elon Musk’s actions on Twitter “could affect consumer confidence in Tesla,” Judge Morgan Stanley said. The American bank also fears that some of the manufacturer’s commercial partners will reduce their cooperation so that their reputation is not indirectly linked to the controversy on Twitter.

“Musk excelled where the “bears” [les investisseurs tablant sur une baisse, NDLR] Wedbush analyst Daniel Ives lamented in November, as quoted by Reuters. “The circus on Twitter is gradually starting to affect the value of the still pristine Tesla brand,” he lamented.

However, the total drop in Tesla stock isn’t just about the Twitter soap opera. Rising interest rates are hurting tech groups’ estimates and fueling concerns about demand from car buyers as financial conditions tighten. The group’s prospects in China, where Tesla has its most important gigafactory, are also worrying the market. The group recently had to agree to significant price cuts in that country in the face of increasingly fierce competition from local players.

Julien Marion – © 2022 BFM Bourse

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