Image source: CNBC
Elon Musk: Tesla, a producer of electric vehicles, had its shares drop by 8% on Tuesday, reaching a new 52-week low.
CEO Elon Musk attributed the drop to macroeconomic causes.
The news
In a day of uneven market performance on Tuesday, Tesla shares dropped to a 52-week low and finished at roughly $138 per share, down 8%.
Elon Musk attempted to blame macroeconomic variables.
Longtime Tesla supporter Ross Gerber tweeted:
“Tesla stock price now reflects the value of having no CEO. Great job tesla BOD – time for a shake up. $tsla.”
Gerber started a covert campaign to get Tesla’s shareholders to approve 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
Tesla’s stock has declined more than other well-known manufacturers since Musk announced to purchase Twitter earlier this year.
Compared to Ford’s 26% and GM’s 12% declines after April, Tesla shares are down 59%.
The S&P 500 is down 14% in the meanwhile.
Distractions
Ross Gerber asserts that Elon Musk has been frequently sidetracked.
He mentioned how the new owner and CEO of the massive social media site Twitter has been causing trouble.
Late in October, Musk purchased Twitter through a leveraged buyout.
He also divides his time between running SpaceX as CEO and managing a significant defense contractor.
Read also: Amazon will Continue its Mass Layoffs until 2023
Twitter acquisition
To pay for the purchase of Twitter, Elon Musk sold billions of dollars worth of his Tesla interests, including a $3.6 billion sale earlier in December.
Last month, he slashed over half the staff after selling his Tesla for billions of shares to “rescue” the company.
He then implemented several product and policy changes, which he eventually undid.
Musk convened an all-hands meeting in November to inspire the surviving Twitter staff following the layoffs.
At the beginning of November, he sold Tesla stock, estimated to be worth $3.95 billion.
The Securities and Exchange Commission revealed in a filing that the shares he sold included 19.5 million additional Tesla shares.
Musk sold Tesla stock valued at over $8 billion in April and over $7 billion in August.
The CEO recruited autopilot engineers, friends, backers, and deputies to join Tesla employees and other firms he co-founded on Twitter.
Tesla’s challenges
Elon Musk has been concentrating on his “Chief Twit” position since late October.
Tesla, which has a significant manufacturing presence in Shanghai, has been providing discounts and incentives to sell cars in China.
The corporation has also fought to improve the productivity of brand-new plants in Brandenburg, Germany, and Austin, Texas.
In addition, despite Europe’s skyrocketing energy prices, Tesla continues to experience supply chain issues in the auto industry.
The scenario in Europe might make electric cars less appealing to drivers.
Price targets
Mizuho Securities and Evercore ISI cut their Tesla price estimates on Tuesday due to the difficulties the company is now experiencing.
“Potential weakness in Tesla sales as macro headwinds and a weaker consumer could drive lower demand for higher-priced EVs,” noted analysts at Mizuho Securities.
Long-term, the business remains optimistic about Tesla, noting the following variables as potential drivers of increased domestic demand:
- New Tesla factories could provide a competitive advantage
- New electric vehicle tax credits in the United States
Meanwhile, China’s EV credits begin to expire in early 2023.
The company has given shares of Tesla a buy rating and a $285 price objective.
Read also: Foxconn announce iPhone factory has resumed production
Tesla shares
Former US Securities and Exchange Commission economist Joshua White, an assistant professor at Vanderbilt University, 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.”
Elon Musk probably lost the trust of shareholders in April when he said he didn’t sell any additional Tesla shares, according to White.
Musk nevertheless persisted and sold many more, to the tune of billions.
“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
