Tesla Inc. : Collateral victim of Musk’s exaggeration on Twitter, Tesla does not stop falling in the stock market

(BFM Bourse) – The action of the car manufacturer specializing in electrics lost 8% on Tuesday, as research departments continue to evaluate their opinion on the title, worried about the dispersion of Elon Musk on Twitter. Since the acquisition was completed, the stock has lost around 40%.

Is there still a pilot in the Tesla? The market seems increasingly doubtful. Not a day goes by that Elon Musk, co-founder and current CEO of the automaker, isn’t making headlines with some controversial new idea for Twitter.

The South African businessman recently “disappeared” in a survey in which he asked if he should stay at the head of the social network, which he completed the acquisition at the end of October for 44 billion dollars.

On Tuesday night, Elon Musk assured that he will step down from the overall management of Twitter as soon as he finds someone “crazy” enough to replace him. This is a few days after journalists’ accounts have been suspended or even the banning of publications containing links to other social networks has been announced.

While Elon Musk seems to be focused on Twitter, Tesla’s stock is definitely and not least continuing its struggles in the stock market.

Sale of stock

Tuesday the title thus fell by 8%, to 139.07 dollars. Since the end of October and the completion of the Twitter acquisition, the stock has lost 40%, while the S&P 500 has fallen just 2%. Back in April, at the beginning of the soap opera of Elon Musk’s acquisition of the social network, the progress exceeded 60%.

Market fears abound. One of them remains that Musk continues to sell Tesla shares to relieve the social network’s finances that are heavily indebted. According to Bloomberg, Twitter currently has to pay $1.2 billion in annual interest.

Last week, the businessman sold another $3.6 billion worth of Tesla shares, bringing the total from April to more than $22.5 billion. As of November Musk has sold about $4 billion. “Musk’s continued selling after repeated assurances that he is done dumping Tesla shares shows mounting pressure on Twitter’s finances,” Bloomberg said.

Musk’s lack of involvement in Tesla is also concerning. Ross Gerber, director and founder of the investment company Gerber Kawasaki, allowed himself a spade on Twitter. Known for his confidence in Tesla, the investor said the automaker’s share price reflects the fact that he has “no chief executive” at the automaker. He also called on the group to discuss a succession plan for Elon Musk and establish an agreement with the billionaire that would make it possible to better understand his intentions regarding his stake in Tesla, which currently stands at around 13%. That clearly didn’t please the billionaire who offered Ross Gerber to go back and “read” his old financial manual.

A “broken” trust

Except that Ross Gerber is clearly not the only investor concerned about the lack of leadership at Tesla. Bloomberg expressed, last month, the dissatisfaction of a shareholder of the automaker, Trevor Goodwin, who almost completely sold his position in Tesla, condemning the mistakes of Elon Musk on Twitter. “He almost abandoned us in favor of his new mission,” he lamented.

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

On Monday, Oppenheimer bank downgraded its advice on Tesla from “outperformance” to “outperform”. Cited by CNN, the research office concluded that Elon Musk’s actions on Twitter, especially his decision to suspend the journalist’s accounts, “seriously undermined” investor confidence in Tesla.

“We believe that banning journalists without [fondements] defensive arguments or lack of clear communication in an environment where many people believe free speech is at risk “is too strong a decision” for most consumers to continue to support Elon Musk/Tesla, especially the ideologies aligned with mitigating climate change” , Oppenheimer developed. The design office also considered Elon Musk “particularly isolated”.

The “Twitter Circus”

Since his takeover of the social network, the entrepreneur took power at Twitter, appointed himself as general manager, fired many employees and made a whole series of sometimes dubious strategic decisions. Musk’s harsh choices have exposed a violent corporate culture that could tarnish Tesla’s image.

According to a survey conducted in late November by Morgan Stanley, three-quarters of institutional investors surveyed by the bank believe that the situation at Twitter has contributed significantly to the recent decline in Tesla shares.

Elon Musk’s action on Twitter “could affect consumer confidence in Tesla”, Morgan Stanley judge. The American bank is also afraid that some commercial partners of the manufacturer will reduce their cooperation, so as not to see their reputation not directly related to controversies on Twitter.

“Musk succeeds where ‘bears’ [les investisseurs tablant sur une baisse, NDLR] has failed for years: destroyed Tesla’s stock,” Wedbush analyst Daniel Ives lamented in November, as quoted by Reuters. “The Twitter circus is slowly starting to affect the value of the so far clean Tesla brand,” he lamented.

However, the entire fall in Tesla stock was not just due to the Twitter soap opera. Rising interest rates are weighing on valuations of technology groups and fueling fears about demand from auto buyers, as financial conditions tighten. The group’s prospects in China, where Tesla has the most important “gigafactory”, also worries the market. The group recently had to agree to significant price cuts in this country in the face of increasingly intense competition from local players.

Julien Marion – ©2022 BFM Bourse