Fed up with Elon Musk’s antics on Twitter, longtime Tesla investor Trevor Goodwin recently sold US$30,000 of the electric car company’s stock.
Goodwin, 46, started investing in Tesla about five years ago, and he and his wife both own vehicles from the company. He once talked up the cars to all his friends. Now, he’s offloaded most of his shares, keeping only about US$500 worth. He said he’s no longer willing to deal with the erratic behavior of its billionaire chief executive officer.
“It’s almost like he’s abandoned us in favour of his new mission,” the business analyst in Kansas City, Missouri, said. “When he announced he was going to purchase Twitter, I was totally against it because it’s a distraction from Tesla and everything he’s trying to accomplish there.”
Musk recently completed his US$44 billion acquisition of Twitter after a tumultuous year filled with lawsuits, public fights and squabbling about spam bots. The CEO has sold at least US$36 billion of his own Tesla shares to fund the buyout, and broader concerns about how he’s dividing his time between his many companies have also weighed on the car company’s stock, which is down about 50% this year.
Musk’s own net worth has dropped by more than US$99 billion in 2022 to US$170.9 billion, according to the Bloomberg Billionaires Index. He’s now at risk of losing his spot as the world’s richest person for the first time since 2021. As of the close of trading Wednesday, after Tesla’s stock fell for a third day in a row, his fortune was only US$4.8 billion higher than France’s Bernard Arnault.
Since the acquisition, Musk has fired most of Twitter’s employees, restored banned accounts and grappled with advertisers, including Apple Inc. He spends a lot of time tweeting, advocating for his vision of free speech and telling his followers to vote for Republicans.
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All that chaos is concerning for investors in the firm that made Musk his fortune: What happens to Tesla with its CEO seemingly so distracted?
Retail favourite
The electric-vehicle maker has long been a darling of small-time traders, especially the legion who began investing during the pandemic bull run, helping to send Tesla’s market value above US$1 trillion and making Musk the world’s richest man.
Many holders are undeterred by the recent losses, which total about US$78 billion this year for retail investors, according to Vanda Research. Allocations to Tesla currently comprise about 10% of the average retail portfolio, Vanda said, and several of the company’s biggest institutional investors have also increased their positions in recent months.
Tesla shares have been hit by a broader slump in technology stocks, supply-chain snarls, rising raw-material costs and lockdowns in China. But there’s no doubt the Twitter deal and Musk’s subsequent share sales have added to the downdraft: Tesla tumbled after he initially disclosed his plan to buy Twitter, and the post-acquisition selloff at one point pushed the stock to its lowest level since November 2020.
Musk has said that adding Twitter to his workload, which also includes running SpaceX, means he works 120 hours a week, up from 70 to 80 previously. Musk didn’t respond to a request for comment.
Despite everything, many traders are staying loyal, even if they’re not thrilled with the drama. Only the SPDR S&P 500 ETF beats Tesla as retail investors’ most-bought security year-to-date, according to Vanda.
Earl Banning, a military psychologist in Anchorage, Alaska, has been a Tesla fan since 2015 when he first bought a few hundred shares. He’s been through ups and downs with the company and has defended Musk on social media along with other supporters. This latest chapter, however, has “lost a lot of us,” he said.
“I believe in Tesla and SpaceX, and I knew this was going to be a distraction,” Banning said, citing the yet-to-be-released Cybertruck and the just-released Tesla Semi trucks as projects Musk should be focusing on.
Banning isn’t planning to sell his position — now thousands of shares due to multiple stock splits — but wishes Musk would be less political and sensational. “It’s been so unnecessary,” he said. “You've got a great car company — just stop it.”
Uncertain future
For Jonathan Batchelor, a Tesla investor in Phoenix, the most concerning aspect of the current situation is that it’s not clear who’s in charge at Tesla now that Musk is spending so much time on Twitter.
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The 43-year-old lawyer first started investing in the carmaker in early 2019, meaning he rode the pandemic gains — and subsequent fall. He attributes the drop to the broader macro environment and the unwinding of overvalued electric-vehicle stocks. But the Twitter news didn’t help.
Now, he’s looking for some kind of guidance from Tesla leadership, something to reassure investors that the company is on solid footing even while its CEO’s attention is diverted.
One silver lining? At least the blunders Musk is currently making at Twitter aren’t directly affecting Tesla’s fundamentals.
“In some ways, it may be helpful to some of Elon’s companies if he goes through some growing pains in his management of Twitter and learns lessons in dealing with that organization rather than making mistakes with Tesla,” Batchelor said. – Bloomberg
