Elon Musk’s path of destruction through Twitter is no longer confined to that social media company. The value of Tesla, the biggest company that Musk owns, has plummeted 64 percent from its peak value of last year, the largest collapse in share price since the company went public in 2010. It is beginning to worry small investors like me who own stock in Tesla and drive the cars the company produces.
I love my Tesla Model 3. It is the best car I have ever owned. Shortly after my wife and I bought it in 2019, we were so impressed with its quality and the vision of the company that we bought stock in Tesla. It was cheap. Now, thanks to dividend reinvestments and stock splits, we own about 2,000 shares. It forms a fairly large part of our retirement portfolio. So when the stock price tanks, so do the prospects for my secure and predictable retirement.
We also have to worry about whether the company behind our car will continue to exist, if only for basic service to the vehicle. Or will we end up owning the equivalent of a Studebaker? At least that American car company lasted over 100 years before closing its factories in 1967. Will Tesla, founded in 2003, last 20 years?
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The fear is that Musk’s erratic behavior on Twitter raises serious questions about his mental stability and management ability. Do you trust him to build a car that you depend on to safely get you from one place to another? (For that matter, do you trust his SpaceX company to launch military satellites and astronauts?)
Musk has also sold $40 billion of Tesla stock in recent weeks to finance his Twitter purchase, and has shifted top Tesla staff over to Twitter to help correct the chaos he has introduced to the company. Both undermine the value of Tesla.
I tweeted last Friday about my concerns. It went viral in hours.
“I’m a @Tesla investor and I want @elonmusk to get off @Twitter,” I wrote. “The value of my shares has been cut in half since he made his move to take over this platform. I love my Model 3, but he is killing the company.”
Five days later, this tweet has over eight million impressions, almost 60,000 likes, 14,000 retweets and 12,000 replies—the latter of which are divided roughly in half between those who agree, and those who angrily insult me for criticizing Musk.
Many of the comments demonstrate how Musk’s statements and actions since buying Twitter have severely damaged the Tesla brand. “I can confirm this entire fiasco, and the burgeoning availability of competitive products,” wrote one person who described himself as a progressive, “has pretty much ensured I won’t step foot in a Tesla dealership.” Musk is driving away the core audience for his most important product.
My small investor fears are mirrored now by big investors. Tesla’s third-largest individual shareholder, Leo KoGuan, who owns $3 billion in shares wrote on December 14, “Elon abandoned Tesla and Tesla has no working CEO.”
“Brand equities can go downhill fast once comprised,” investment advisor Gary Black tweeted, “@elonmusk’s libertarian political views—which I tend to share—clearly aren’t helping the Tesla brand.”
After Musk cashed in another $3.6 billion of Tesla stock in early December, Dan Ives of the investment firm Wedbush warned, “The Twitter nightmare continues as Musk uses Tesla as his own ATM machine to keep funding the red ink at Twitter.” Other experts see Tesla’s plunge of 55 percent this year as a direct result of Musk’s political tweets and statements. “Elon is Tesla’s brand. He needs to pull it together,” said Loup Capital’s Gene Munster, a self-proclaimed Tesla bull. “What Elon is doing on Twitter is damaging the brand.”
Even investment advisor Ross Gerber, who defended Musk from criticism all year, has had enough. He wants Tesla’s board directors to act. “Elon has now erased $60 bill of Tesla wealth and still nothing from Tesla BOD. It’s wholly unacceptable.” he tweeted December 16. This Monday, he told Yahoo Finance “It’s time for Tesla’s board to wake up and do their job.”
Tesla’s troubles are different from the general slump in markets and manufacturing. Almost all tech and car companies lost share value in 2022, but not as much as Tesla. As of December 19, Tesla was down 62.5 percent, year-to-date. By comparison, Ford Motor Co. was down 46.3 percent. General Motors, down 42.1 percent. Apple down 49.6 percent. Google (Alphabet) down 39.0 percent. Only Meta, the company formerly known as Facebook, did worse than Tesla among comparable companies, down 66.2 percent for the year.
What is the difference between these companies and Tesla? Well, it probably helps that none of them have CEOs who are insulting their customers, telling them which political party to vote for, holding Twitter polls on whether they should stay as CEO, censoring journalists, demanding the prosecution of Dr. Fauci, or obsessing about Hunter Biden’s laptop.
Musk, the man who made Tesla, has now become its chief liability. He must choose: Either quit Twitter and go back to running one of the most successful new car companies in history, or leave Tesla and ride his Twitter obsession all the way to the bottom. Please just don’t drag Tesla down, too.
