Tesla’s stock continues to plummet, with the electric car company poised to end 2022 as its worst year on record, and shareholders are calling on Elon Musk to redirect his attention away from Twitter and begin regaining investor confidence.
Tesla shares have fallen 69 percent in 2022, with a 44 percent drop in December, making it the company’s worst-ever monthly performance. The rapid decline spooked investors, with Tesla’s top five trading days by volume all occurring this month.
China’s production slowdown has played a significant part in driving the stock down, according to Gary Black, managing partner of investment firm The Future Fund, which reportedly owns $50 million worth of Tesla shares. Tesla plans to continue halting production at its Shanghai plant next month, which accounts for more than half of the company’s global car deliveries, amid rampant Covid-19 worker infections. “The bigger question is, will it happen again? Will they cut production in the future?” said Black.
The Tesla CEO’s behavior at Twitter, which he first approached about buying in April and later acquired for $44 billion, has also contributed to the stock dip, said Black. “It didn’t start falling until Twitter,” he said.
Musk’s time at the helm of Twitter has been contentious, with major decisions conducted via public polls and Musk temporarily suspending the accounts of journalists for supposedly engaging in “doxxing” his location. “Doing it himself has been a train wreck,” said Black. “He’s made a lot of mistakes, pissed off advertisers.”
The Future Fund, a Chicago-based investment firm, counts Alphabet, Tesla, Quanta Services and Chipotle among its major holdings.
One of Musk’s polls earlier this month found a majority of users agreeing he should step down as Twitter CEO. While Black believes Musk will abide by the results, he said whoever is chosen as the next leader will be integral to the future success of Twitter, and by extension, reflect on Tesla. “It can’t just be a tech person, he needs someone to turn around the culture,” said Black, who believes Twitter needs a leader with extensive social media experience. “I just hope he picks the right person.”
A pivotal moment for Musk and Tesla
Musk will also need to prove that Tesla’s brand equity hasn’t been damaged in the past few months, in addition to finding a permanent solution to production issues in China, said Black.
The Tesla CEO, who has sold $24 billion worth of company shares in 2022 in order to fund his Twitter acquisition, promised on Dec. 22 that he won’t sell any more in the next year. Breaking this promise would mean a major loss in credibility, said Black.
Earlier this month, Leo Koguan, an Indonesian billionaire and third-largest individual shareholder of Tesla, called for Musk to step down. “Tesla needs and deserves to have working full-time CEO,” wrote Koguan, who owns $3.4 billion worth of Tesla shares, in a tweet.
However, despite the impact Musk’s recent behavior has had on Tesla, Black doesn’t want Musk to give up leadership at the company just yet. “I’m not in the camp that he should give up the role,” he said. “He’s the driver of Tesla, I don’t want to see him leave.” Black also said the Future Fund has no plans to sell Tesla shares in the near future. “We don’t own it because of Elon, it’s because we think the fundamentals of the business are very strong.”
However, the strong ties between Musk’s identity and Tesla are creating a pivotal moment for the company, according to Dan Ives, a Wedbush Securities analyst specializing in Tesla stock. “Musk is Tesla, Tesla is Musk,” he said. “Now, this is a huge fork in the road.”
Ives believes the majority of Tesla’s decline has been driven by Musk’s actions at Twitter, including controversial political statements and his use of Tesla as “a personal ATM machine.”
In order to regain the shaken confidence of investors, Musk must name a new Twitter CEO will have to be named in the next month, stop selling stocks and set realistic expectations for the next year, said Ives. “Musk needs to get with the program and ultimately read the room and focus more of his attention away from Twitter.”