You will read here details about Elon Musk twitter fixation Didn’t cause Tesla Stock’s drop. There is a widespread belief that the mega-billionaire Elon Musk’s obsession with Twitter is to blame for the precipitous decline in Tesla stock price this year. However this week’s dramatic drop in Tesla stock price demonstrated that the issues at Musk’s automaker extend far beyond Twitter.
Despite Musk’s hints that he may step down as Twitter CEO, the stock price of Tesla has fallen as investors fret about the company’s future. The fact that Tesla is advertising a deal at this unusual time is a hint that demand is falling. Earlier this month, the corporation was giving a $3,750 rebate to customers who take delivery of a vehicle before the end of the year. On Thursday, Tesla increased their discount to $7,500, double what it had been.
Wedbush Securities tech analyst and Tesla bull Dan Ives lowered his price objective for the stock on Friday from $250 to $175 because “Tesla obviously is starting to see demand cracks in China and the US at a time that EV competition is expanding across the board.” For investors, Tesla’s price drops were the final straw.
The possibility of a US recession next year, which would have a negative impact on auto sales, is also weighing on Tesla’s stock price. On a Twitter Spaces chat on Thursday, Musk predicted a “severe recession” for the economy in 2023.
According to Reuters, he predicted, “some macro drama that is higher than people now anticipate,” adding that the housing and automotive industries would be “disproportionately damaged.”
Tesla’s Dubious Market Value
Tesla’s stock price is struggling in part because skeptics doubt if the company was ever worth the trillion-dollar valuation it had at the beginning of the year. Despite having a fraction of the sales of any of the 12 top automakers in the world, Tesla was once valued more than them all. As of right now, that sum equals $399 billion.
Another Tesla supporter, Gene Munster of Loup Ventures, claimed the company “got ahead of itself in the near term.” I am still of the opinion that this organization has enormous growth potential. In my opinion, it will reach those levels of popularity once more. However, getting there may take an extremely long time.
The company’s projected annual sales increase of 50% was a major factor in that price tag. In October, it admitted that it would fall short of the sales goal it had set for the year. The stock skyrocketed by 743% in 2020 thanks to expectations that Musk will shake up the mammoth global auto sector. Ives attributed much of Tesla’s valuation to Musk because “Tesla was perceived as a transformative technology firm, not as an automotive.”
Making Empty Promises
The sky-high valuation of Tesla, its detractors say, is based on empty promises from CEO Elon Musk to deliver on things that have been promised for years but have yet to be released.
The Cybertruck Tesla’s pickup truck was unveiled three years ago with projections of a 2021 manufacturing start. Production is set to begin in 2020, with an increase in 2024, putting it years behind Ford and the startup EV producer Rivian both of which offer electric pickups that can be purchased right now. A General Motors electric pickup truck could lag behind it.
“Elon Musk has a pathological problem with the truth,” argued Gordon Johnson, one of Tesla’s most vocal detractors in the financial community. “His reputation as a genius and innovator rests on a foundation of unfulfilled promises,” said another.
When Tesla is priced similarly to other automakers rather than based on its promises Johnson predicts a significantly greater decline in Tesla stock. He noted that in order to meet Tesla’s growth ambitions the company needs to create new factories nearly every year. However, the two new factories in Germany and Texas that opened this past spring are still not running at full capacity. Meanwhile, he said that the company’s Chinese facility has reduced output in response to sluggish market demand caused by the Covid restrictions.
Although Volkswagen in Europe and BYD in China is making significant inroads, Tesla is still the leading EV manufacturer worldwide. Additionally, well-established rivals like Ford and General Motors are entering the market.
Aspects of Twitter
But that doesn’t mean Twitter wasn’t a factor in Tesla’s stock price loss this year: shares have dropped 66% since Musk’s interest in Twitter was first publicized in April and another 45% since he closed on the deal in late October. As a result of Musk’s $44 billion purchase of Twitter, investors are upset that he looks to be financing much of the deal by selling Tesla stock. Since April, when Musk’s interest in Twitter was made public, he has sold $23 billion worth of Tesla shares, making him the company’s largest shareholder.
Musk stated on Thursday’s Twitter Spaces call that he will no longer be selling Tesla stock until at least 2024. Despite saying in April that he would stop selling Tesla shares, he has actually sold $14.4 billion worth of them since then. To pretend Musk is finished selling stock has been a Pinocchio move. “Investors want to see him put his money where his mouth is,” Ives added.
Yet another Twitter-related fact: Musk has appointed himself CEO of the company, making Tesla and SpaceX the three primary corporations he oversees. This has led many to conclude that Musk’s seeming lack of interest in Tesla has scared away the company’s previous followers on Wall Street. However, Musk started the week by conducting a poll (on Twitter, of course) about whether or not he should step down as CEO of his social media side project. And 57.5% of those who voted wanted him gone, so he stated he would do as they wish.
Musk tweeted that he will quit “as soon as I find someone crazy enough to take the job!” although it’s possible that this process could take some time. While he may be stepping down as Twitter’s CEO, Jack Dorsey reassured his followers in the same tweet that he has no intention of leaving the company entirely and will instead “only oversee the software & servers teams” after he has found a new “fool” to fill the role.
Early Monday trading saw a spike in Tesla shares thanks to the poll findings from late Sunday, but the company’s stock closed the day down and has fallen further every day since. After dropping 9% on Thursday, Tesla’s stock dropped another 2% on Friday, bringing its weekly loss to 18%. The extent to which the Twitter fiasco has harmed Tesla’s reputation is another open topic. During his brief time in charge, Musk has embraced conspiracy theories, made anti-trans remarks, sacked hundreds of workers and banned journalists while re-adding Donald Trump and other previously banned accounts.
While it could have won him the hearts of some, it probably turned off others, especially liberals who might be ready to pay extra for a greener car. The notoriety surrounding his time on Twitter, according to Munster, cost Tesla five percent of its sales.
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