After Wall Street lowered its price estimates for the stock of the manufacturer of electric vehicles, Tesla’s shares slumped 8.12% on Tuesday. Analysts worry that CEO Elon Musk is preoccupied with his hostile takeover and micromanagement of Twitter and that China sales will suffer if COVID-19 is allowed to proliferate after the Chinese government changed its position on severe limitations.
At the time that this story was written, Tesla’s shares had fallen to a more than two-year low of $138.
Analysts claim that investors are worried that Musk would sell additional Tesla stock to finance Twitter and that his antics on the social networking site are damaging the reputation of the electric vehicle manufacturer. One of the several stock dumps the CEO has carried out this year was the sale of $3.5 billion worth of shares by Musk last week.
Investors are urging Tesla’s board of directors to remove Musk from his position as CEO in order to intervene and shield shareholders from the stock decline.
“The value of not having a CEO is now reflected in Tesla stock price. A portfolio manager at Gerber Kawasaki, Ross Gerber, tweeted, “Great work Tesla BOD – Time for a shake up.
It’s not yet obvious whether public opinion of Musk’s participation on Twitter has had an impact on Tesla EV sales; after all, Teslas are still largely regarded as good cars by all measures of battery range, performance, technology, and safety. The results for the fourth quarter of 2022 won’t be available until January.
However, according to Gordon Johnson, CEO and founder of GLJ Research and Tesla bear, the concerns over Chinese sales are legitimate. Tuesday at a Twitter Spaces event, Johnson mentioned that Tesla’s biggest and most lucrative market is China.
The China Passenger Car Association (CPCA) tracks monthly sales, but geographical breakdowns of Tesla cars sold every quarter are hard to obtain. According to the CPCA, Tesla shipped a total of 188,317 electric vehicles from its Shanghai facility in the third quarter, with 28,217 being delivered in July (a low amount caused by modifications to the factory’s production lines), 76,965 in August, and 83,135 in September. That amounts to 343,830 units, or slightly more than half of all the devices sold globally in Q3.
China accounts for a larger share of Tesla’s global sales because its rate of EV adoption is higher than that of the United States and Europe. Investors worry that sales will decline in the near future as COVID-19 threatens to devastate the nation in the wake of the Chinese government’s complete relaxation of its formerly harsh regulations. If that occurs, Tesla would have to rely more on its Western markets, which could be problematic given the Twitter conundrum.
Is the Twitter turmoil, specifically all the debate, having an effect on the Tesla EV brand? Gary Black, managing partner of the Future Fund, made this statement on Tuesday at a Twitter Spaces session. Tesla is the fund’s largest holding, according to Black, who owns around $50 million in the company’s stock.
Is it forcing consumers to either change or not place their orders for Teslas, or, you know, just making the brand less popular among those who purchase EVs? I don’t see it, but institutional investors have expressed concern about it.
If Musk doesn’t stop, Black warned, his attitude — particularly his political language about the “awake mind virus” — will eventually have an effect on the brand. The board should “take Elon aside and say, look, you may have these political ideas, but you’re not helping the Tesla brand by articulating them,” the executive continued.
Black remarked, “I don’t know what he gets out of offending his left-leaning clientele.
Musk recently asked people on Twitter if they thought he should resign as CEO of the social media site, and he promised to follow the results of the vote. Voters chose to have him go, which prompted Musk to claim that he thinks the poll was manipulated by bots. Musk hasn’t officially confirmed that he’s seeking for a new CEO, although there have been stories to that effect.
Black claimed that one of the reasons investors are selling Tesla shares is the lingering doubt as to whether Musk will follow through on his promises.
There is no better way for Black to express his opinion that the stock is too cheap than to call on Musk and Tesla to buy back some of the stock, like many other investors have done.
Johnson claimed that the stock, which is inflated in large part as a result of the breakthroughs Musk has promised but has not yet achieved, is priced higher than General Motors, Ford, and Stellantis put together.
I think that Tesla’s price increase was caused by Musk’s declaration that he would produce vehicles with optical cameras that could be used for driving. That has not been done by him, Johnson added. “He promised to have a $25,000 automobile delivered using battery technology. That is not what he did. He claimed to be an inventor of silicon. He isn’t. He claimed to be the inventor of the bipedal robot. He isn’t. I think it was these assurances, not Tesla’s performance, along with quantitative easing that raised the stock.
Johnson suggested that since the stock price is declining, it’s probable that investors are realizing that Tesla is an automaker just like any other, and its stock should reflect that, rather than only being alarmed by the current events with Twitter and in China.