It’s a total stock market disaster for Tesla.
Even for the world leader in electric vehicles, this is worrying, even alarming.
It won’t be a memorable year for investors in the automaker. And if they do, they’ll probably remember that within a few months the value of a portfolio can melt away completely.
The Elon Musk-led company had a market capitalization of $1.13 trillion on December 21. 31, 2021. The stock ended the year at $352.26. Almost a year later, all of those numbers have been more than half dead.
The market value is only slightly higher at $474 billion, meaning nearly $640 billion in market capitalization has evaporated in 12 months. Tesla shares are currently trading at $150.23, down 57.4% year-over-year.
What happened?
The fundamentals remain solid
Company fundamentals appear solid, although there are some demand-side issues in China and the United States, where the automaker has done something unheard of: promotions after production exceeded deliveries in the third quarter.
“On the delivery side, we expect growth of just under 50% due to an increase in the number of cars in transit at the end of the year, as indicated above,” said the chief financial officer. Zachary Kirkhorn to analysts during the third quarter. .earnings call. “This means that, again, you should expect a gap between production and deliveries in Q4, and these cars in transit will be delivered shortly to their customers when they arrive at their destination in Q1.”
In a sign that things are not going the way Musk wants, the billionaire has brought in Tom Zhu, the boss of Tesla in China, to run the Tesla factory in Austin, which manufactures the SUV / crossover Model Y, and soon the highly anticipated Cybertruck, the futuristic pickup from Tesla, whose production should start in mid-2023.
For Tesla shareholders, all these questions are secondary. For a growing number of them, the problem is Musk. Yes, Musk, their big boss and the architect of Tesla’s success.
They blindly trusted him. They had unparalleled admiration for him and knew that, as long as he was around, their investments would be in good hands and bear fruit.
But this year, something unusual happened: Musk personally decided to buy Twitter in order, according to him, to make the platform a place of free speech. Since he launched the takeover on the social network on April 22, the Techno King, as he is called at Tesla, has only focused on Twitter.
He is omnipresent on the platform, attacks his supposed enemies and regularly creates controversy. The problem is that since Twitter’s $44 billion bid, Tesla’s stock has lost 55.2% of its value and its market capitalization has shrunk by more than $580 billion. Musk finalized the deal on Oct. 1. 27 years old, less than two months ago. Tesla stock lost 33.3% of its value in this short period.
Initially, shareholders and individual investors kept silent about their leader’s Twitter adventure; but when Tesla stock started to falter, they began to indirectly ask Musk to refocus on Tesla, meanwhile, there’s no doubt that the automotive group is paying for Musk’s tribulations with Twitter.
Is Musk the problem?
With no reaction from Musk, they began to speak out and criticize him. Shareholder criticism is now turning into a revolt, unheard of in the Tesla community, where Musk has been revered until now.
“Elon has now wiped $600 billion worth of Tesla wealth and still nothing from Tesla’s board of directors,” Ross Gerber, one of Tesla’s most vocal shareholders, lambasted on Dec. 21. 16 on Twitter. “It is completely unacceptable.” BOD stands for board of directors.
Gerber said he was going to try for the board: “I have informed tesla that I wish to run for the board of directors of Tesla. I wish to be added to the proxy statement. It is time that Tesla shareholders have a voice on the board as well as good communication with the public.
No doubt surprised by such a brutal attack, Musk blamed Tesla’s stock market woes on the Federal Reserve’s monetary policy, as he had already done a few days earlier. The central bank has aggressively raised interest rates to fight inflation to its highest level in 40 years. This policy will cause a so-called hard landing, that is, a recession, many economists have warned.
“Tesla works better than ever! the billionaire replied to Gerber. “We don’t control the Federal Reserve. That’s the real problem here.”
Musk provided further explanation on December 12. 17: “Security Analysis 101. As the “risk-free” real rate of return on Treasuries approaches the much riskier rate of return on stocks, the value of stocks falls. For example, if treasury bills and stocks both had a value of 10% return, everyone would just buy the former. »
“The Fed didn’t help,” one Twitter user joked. “But the real issue is that shareholders are concerned that Twitter is eating up too much of your time. That’s a valid concern.”
That’s when Musk tried to justify himself by saying he had just finished a production progress meeting at the Tesla factory in Austin.
“I literally just finished my meeting reviewing the production progress of Giga Texas,” the serial entrepreneur replied to the review.
It’s rare to see Musk defend himself like this. Ordinarily, the billionaire is rather abrasive, counter-attacking when he is put in difficulty. These attempts at justification suggest that he is aware that a revolt is rising among shareholders, who only see their investments diminish.
“My friends, here’s the love story,” tweeted Leo KoGuan, one of Tesla’s largest individual shareholders. “Elon married U (SH), every night he whispers beautiful words, ‘I’m the first in the last out’, yours forever and ever, never leave you, grow old and rich together.”
“Later, he disappeared, sleeping in another’s bosom. You sleep alone, heartbroken,” the investor added.
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