Elon Musk took Tesla to the sky and then personally brought the electric car company to the abyss: Market capitalization decreased by $ 900 billion, arranged on a par with popular brands

For most of the year, Tesla stock seems immune to all gravity. Many speculative investors complain that the largest electric vehicle manufacturer in the United States is reluctantly suffering from the negative influence of Musk, after he became interested in acquiring a famous social networking platform. Three months ago, when Tesla had only lost 25% of its value from its 2021 peak, people still thought it could escape the worst carnage, according to the FT.

However, that scenario did not materialize. The last terrible month of the year sent Tesla stock down nearly 70% from last year – a drop enough to make it the worst-trading stock of 2022 on Wall Street. Before recovering partially in the latest trading session, Tesla’s market capitalization was only $ 355 billion, or nearly $ 900 billion down from its peak in 2021.

The reason for this sell-off is easy to find, at a time when Wall Street is no longer seeing impressive momentum. The auto industry itself is also facing an uncertain 2023, after recession risks cast a shadow over the economic outlook as well as consumer demand.

Of course, Musk also bears most of the responsibility, whether it’s arrogance, carelessness or simply boredom with his day job. His personal mistakes have become a “catalyst” that makes Tesla more miserable.

Musk likes to think that his presence on Twitter is of immense value to Tesla shareholders. This is partly true. Over the years, the new megaphone has helped cement Musk’s image in the public eye as a top eccentric businessman, even as it has sparked controversy with regulators.

Three months ago, when Tesla had only lost 25% of its value from its peak in 2021, people still thought it could escape the worst carnage.

In return, Twitter must witness 2 months of terrifying polarization under the new boss. Tesla’s image accordingly is more or less tarnished.

“The market shows that the Tesla brand has been negatively impacted by Twitter dramas. In the past, people used to show off each other proudly about this company’s electric cars, but now it’s different. Twitter controversies are hurting brand equity,” wrote Gary Black, managing partner at Future Fund, which owns $50 million in Tesla stock.

According to experts, Elon Musk is wrong to think that the stock price increase is inherent. He bought Twitter at the most sensitive moment in the electric vehicle industry, when a host of brands jostled for share in a near-saturating market. Looks like this was the wrong decision.

Since the end of last year, Musk’s sale of Tesla shares worth more than $39 billion has caused panic among investors. For the first time since November 2020, Tesla’s capitalization fell below the $500 billion mark after several sessions of sell-off, despite previous commitments. Musk explained that he was forced to raise such a large amount of cash to prevent the “worst case scenario” from happening.

According to Bloomberg, China is currently the most competitive EV market, with a host of domestic automakers as strong as BYD. According to the China Vehicle Association, domestic brands accounted for nearly 80% of electric vehicle sales in the first seven months of the year. Part of the motivation comes from the fact that local EV manufacturers are so good at attracting customers. In particular, companies such as BYD or SAIC-GM-Wuling Automobile have launched a variety of low-cost vehicles to serve the segment of customers with tight budgets. This makes Tesla’s position even more threatened, especially when the goal of increasing the number of fast deliveries by 50% a year – an ambition that Tesla reached earlier this year – is expected to have to be compromised.

Elon Musk announced that he will not sell any more Tesla shares for the next 2 years

“Elon’s star power has reached its limit. Tesla may soon be like everyone else,” said Joe Lowry, founder of consulting firm Global Lithium LLC and former lithium industry CEO.

Most recently, Elon Musk announced that he would not sell any more Tesla shares for the next 2 years. “I probably won’t sell Tesla stock for the next two years. Definitely not next year in any case.”

In a conversation on Twitter Spaces, Elon Musk also affirmed that he would support a buyback of Tesla shares when the company is more confident in the direction of the economy. Suspicions that Musk is spending too much time on Twitter and neglecting the electric car company are also cleared by this billionaire.

“I haven’t missed any important Tesla meetings all this time,” Musk said, adding that Tesla is many times more complex than the social media company. He is now aiming to produce a “significant volume” of lithium within two years at a refinery under construction in Texas for use in electric vehicle batteries.

However, even if Musk pledges not to sell any more Tesla stock for two years, it’s not certain that the electric car company won’t be taken out as a “cannon fodder” again.

“Tesla is like an ATM machine to withdraw money” to grow the newly owned social network into a “super app,” said Dan Ives analyst at Wedbush.

By: Bloomberg, FT