Tesla stocks plummet as investors fear Twitter drama and lost sales in China • InNewCL
Tesla stocks plummet as investors fear Twitter drama and lost sales in China • InNewCL
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Tesla shares fell 8.12% on Tuesday after Wall Street downgraded price targets for the electric vehicle maker’s shares. Analysts fear that CEO Elon Musk will be distracted from Twitter by his hostile takeover and micromanagement, and that sales in China will be hurt by the Chinese government allowing the spread of COVID-19 after ending its stance on strict restrictions.
Tesla stock is at a more than two-year low of $138 at the time of writing this article.
Analysts say investors are concerned that Musk will sell more Tesla stock to fund Twitter and that his antics on the social media platform are hurting the electric vehicle maker’s brand. Musk sold about $3.5 billion worth of stock last week, one of many stock disposals the CEO has made this year.
Some investors are urging Tesla’s board to replace Musk as CEO, step in and protect shareholders from the stock decline.
“Tesla stock price now reflects the value of not having a CEO. Great job Tesla BOD – time for a refresher.” tweeted Ross Gerber, portfolio manager at Gerber Kawasaki.
It’s not yet clear if Tesla electric vehicle sales have been impacted by consumer sentiment over Musk’s Twitter engagement — after all, Teslas are still widely considered good cars in terms of battery range, performance, technology, and safety. We’ll have to wait for January to see the fourth quarter 2022 figures.
However, concerns about sales in China are valid, says Gordon Johnson, CEO and founder of GLJ Research and Tesla Bear. During a Twitter Spaces event on Tuesday, Johnson noted that China is Tesla’s largest and most profitable market.
It’s difficult to find regional breakdowns of Tesla units sold each quarter, but the China Passenger Car Association (CPCA) tracks monthly sales. The CPCA reported that Tesla shipped 28,217 EVs from its Shanghai plant in July (a low number due to factory line upgrades); 76,965 in August; and 83,135 in September, totaling 188,317 units sold in China in the third quarter. That’s just over half of all units sold worldwide — or 343,830 units — in the third quarter.
China’s EV adoption rates are higher than the U.S. and Europe, so naturally it accounts for a larger chunk of Tesla’s global sales. Investors fear a drop in those sales in the coming months as COVID-19 threatens to ravage the country after the Chinese government fully lifted its previous draconian restrictions. In that case, Tesla will have to rely more heavily on its Western markets, where the Twitter dilemma could cause problems.
“Is the Tesla EV brand going to be impacted by all this Twitter drama, so all this controversy?” said Gary Black, a managing partner at the Future Fund, during a Twitter Spaces session on Tuesday. Black, who owns about $50 million in Tesla stock, said in August that Tesla was the fund’s largest holding.
“Does it make people either cancel their orders or not order Teslas, or just cause the brand to fall out of favor with EV buyers? I don’t see it, but that’s one of the concerns institutional investors ask me.”
Black said he believes Musk’s personality, particularly his political rhetoric that rants about the “wake-mind virus,” will ultimately have an impact on the brand “when [Musk] not stopping.” He said he would advise the board to “pull Elon aside and say, look, you might have these political views, but you’re not helping the Tesla brand by articulating them.”
“I don’t know what he gets out of insulting his left-wing customer base,” Black said.
Musk recently released a Twitter poll asking him if he should step down as CEO of the social media platform and said he would follow the poll’s results. Voters voted to leave, leading Musk to state that he believes bots rigged the election. There have been reports that Musk is looking for a new CEO, but he hasn’t confirmed it yet.
Black said uncertainty about whether Musk will keep his word is one of the reasons investors are selling Tesla stock.
Like many other investors, Black Musk and Tesla have also called on Tesla to buy back some shares, saying there’s no better way to demonstrate that he thinks the stock is too cheap.
Johnson said the stock, which is priced higher than General Motors, Ford and Stellantis combined, is overvalued largely due to advances Musk has promised but has yet to deliver.
“I think the reason Tesla went so high is because Musk said he would have cars that could drive with optical cameras. He didn’t do that,” Johnson said. “He said he had one [battery technology] that would deliver a $25,000 car. He didn’t. He said he is a silicon innovator. He is not. He said he is a world leader in biped robotics. He is not. I believe it was those promises combined with quantitative easing that drove the stock higher, not Tesla’s execution.”
Now that the stock price is falling, Johnson hinted that not only are potential investors spooked by the current situation with Twitter and China, but they realize that at the end of the day, Tesla is an automaker like any other, and stocks should be reflect that.
