- Analysts attribute Elon Musk’s leadership at Twitter as a primary driving force behind Tesla’s financial woes.
On Tuesday, Tesla stock plummeted to its lowest in over two years, the company’s most significant single-day decline in eight months, as CEO Elon Musk faces a tumultuous financial period.
Since the beginning of October, the company’s stock has seen an alarming dip in value – more than a 50% decrease. Investors are concerned that Twitter may be monopolizing much of Musk’s time and energy now that he is its owner and CEO.
Under the reign of Elon Musk, Tesla’s policy implementation has been quite tumultuous as he regularly alters and retracts them. After a recent poll on Twitter revealed that most wanted him to step down, Musk declared his intention to appoint a new CEO. Analysts believe this volatility from its leader is why investors have lost faith in the company with shares dropping 73% since November 2021.
Tuesday’s significant dip in Tesla stock, 11.4% to be exact, came from a Reuters report that exposed the company’s decreased production schedule planned for January at its Shanghai facility. This sparked apprehensions that demand could drop which is currently the largest automotive market globally amid the increasing Covid-19 outbreak cases across China.
Thomas Hayes, Chairman of Great Hill Capital, stated, “There’s no question there are demand fears” and cited Nio, a Chinese rival’s delivery forecast cut in the major market.
Hayes asserted that Tesla’s stock was enduring a “perfect storm” of taxation-induced selling and share release from funds possessing substantial quantities of the company’s shares, compounded by high-interest rates.
Tax-loss selling is an investor’s method of reducing or eliminating their capital gains taxes, achieved by strategically selling investments for a loss.
Furthermore, a Reuters analysis demonstrated Tesla’s used car prices were dropping quicker than those of other car brands, which could negatively impact the demand for new Teslas coming off the production line.
Elon Musk connected Tesla’s recent tribulations to the Federal Reserve raising interest rates, noting that “people will increasingly move their money out of stocks into cash, thus causing stocks to drop.”
After announcing he wouldn’t sell any more Tesla shares for 18 to 24 months, the billionaire still sold millions worth of his own stock in order to finance buying Twitter at a whopping $44bn. Financial filings show that since April 2022, he’s offloaded almost four billion dollars worth of Tesla stocks.