Tesla or Twitter? Elon Musk decided to work on Tesla. Investor responses to Elon Musk’s choice.
Maybe the excitement of it all got to him. But after watching the World Cup final on Sunday in the stands at Qatar’s Lusail Stadium alongside Jared Kushner and a group of Gulf sheikhs, Elon Musk decided to launch a Twitter poll asking if he should step down as CEO.
More than 17 million people voted, and the results are in 57% of them believe the billionaire Twitter owner ought to resign. Following Musk’s assertion that he would “abide by the results of this poll,” rumours about his impending resignation and potential replacements started to circulate.
The poll was conducted shortly after Musk apologised for implementing a new Twitter rule that forbade users from posting links to their profiles on competing social media platforms including Instagram, Mastodon, and Nostra. This policy change infuriated users, who were outraged by it. Less than a day later, Twitter removed the policy.
The results of the poll are not shocking, according to Dan Ives, managing director of equity research at Wedbush Securities, “considering that Musk has taken over Twitter in late October it’s been a disaster of enormous proportions.”
Musk finally had to choose between running Tesla and Twitter when the poll was conducted. Analysts and stockholders alike slammed his electric vehicle startup last week, pushing him to decide which he desired more.
The Twitter poll provided him with a helpful escape pod, and he decided on Tesla, which accounts for over half of his estimated $156 billion worth.
Pressure on Tesla
Since he first came to public attention, Musk has been challenged about how he has run multiple businesses. The management of Tesla, SpaceX, the Boring Company, or Neuralink alone would be enough to keep even the most stable CEO busy.
Tesla supporters were understandably worried about Musk having to shoulder yet more debt when Twitter was added to the equation. Last week, these concerns reached a boiling point.
Leo KoGuan, the third-largest unique stakeholder in Tesla, said his displeasure with Musk in a tweet on December 14 by claiming that Musk “abandoned Tesla and Tesla has no operational CEO.” He advised Musk to identify a replacement who would be subject to independent oversight by the board of directors.
It is in the best interest of Tesla shareholders for Elon to be back at Tesla working full time, according to Ross Gerber, a fellow Tesla shareholder and CEO of Gerber Kawasaki Wealth and Investment Management, who tweeted this on Saturday.
It’s good to be frustrated. According to SEC records, Musk sold 22 million Tesla shares last week for about $3.6 billion, which contributed to the company’s market capitalization falling to less than $500 billion for the first time since November 2020.
According to Chris Beauchamp, chief market analyst at IG, “If you look at the share price, it continues to suffer.” The individual that pushed this company to where it is now has taken their eye off the ball, and I believe the markets are thinking.
Tesla is impacted by Twitter’s debt issues.
Since announcing the Twitter acquisition, Musk has sold off around $23 billion in Tesla stock as the scale of the gamble he made in the addition — one he undoubtedly realised after trying to back out of the agreement — has become increasingly apparent.
The transaction is backed by $13 billion in debt from a group of banks, including Morgan Stanley, Bank of America, and Barclays, and equity from investors like Sequoia Capital and the Qatar Investment Authority.
Wedbush’s Ives stated in an analyst note that “the Twitter disaster continues as Musk utilises Tesla as his ATM to keep fueling the red ink at Twitter which gets worse by the day” on December 14.
When borrowing rates were low and Tesla’s shares were rising, that surplus cash wasn’t a big problem. When Musk first proposed the notion of purchasing Twitter for $44 billion earlier this year, it was easier to utilise Tesla stock to support such a risky wager.
However, utilising Tesla shares to determine the debt on the Twitter takeover is problematic for Tesla because the Federal Reserve has aggressively increased interest rates to combat inflation.
Because it would undoubtedly get more expensive, Beauchamp added, “that’s a notable burden for the corporation.” There is now still another worry.
Musk is fully engaged in self-capitulation.
Beware of debt in tumultuous macroeconomic situations, especially when Fed keeps rising rates, Musk warned in a December 13 tweet, just before news of his selling of Tesla stock became public. Musk seems keenly aware of the detrimental effects of the broader economic crisis.
He has made an effort to cast blame on the Fed to justify the loss of about $600 billion in Tesla market value. In response to Gerber, he said that Tesla was operating more effectively than ever, but added that “we don’t control the Federal Reserve.”
However, Tesla’s issues go beyond this, as the company badly underperformed the NASDAQ in 2022, a year in which a wide spectrum of other companies faced relative difficulties without seeing the same stock price declines.
Elon Musk is so closely tied to Tesla that it depends on him to succeed or fail, according to Beauchamp. On Monday, the findings of the poll had a beneficial impact on Tesla’s stock price, which increased by about 5%.
The head of Twitter once said that he would look for a replacement to lead Twitter in due time. Several close friends have shown to lead the social media startup, including computer scientist and podcaster Lex Fridman.
Musk, however, is aware of the difficult task he would be entrusting others with after failing to implement several plans, including a new verification subscription plan and a decision-making process that seemed to be made arbitrarily about the exclusion of journalists, all while advertisers abandoned the platform.
He tweeted this on Sunday: “Whoever can truly keep Twitter alive doesn’t want the job. There isn’t a replacement.”
Wall Street players are yelling more and more about how Elon Musk’s Twitter habit is affecting Tesla.
Investors are growing more concerned about Tesla’s reaction to Elon Musk’s purchase of Twitter. After declaring in April that he had “no future TSLA sales planned,” documents published on Wednesday announced Musk sold 22 million further shares of Tesla, valued at approximately $3.6 billion, for the third time.
With that, Musk has already sold $23 billion worth of Tesla stock this year. A few days ago, Musk announced that Tesla would eventually gain from his ownership of Twitter. Analysts, though, are becoming increasingly pessimistic about what will occur.
Because Musk has been using “Tesla as his ATM to maintain funding” the social network, Dan Ives of Wedbush stated in research on Thursday that Twitter stayed a nightmare for investors.
The point that Tesla’s electric vehicle sales are declining as economies throughout the world struggle to recover from the pandemic and its lingering effects isn’t exactly shocking.
However, it does pose a challenge for Tesla and its owner, who continues to use the company’s stock to fund his endeavours to develop “the everything app,” also known as “X,” which he refers to as a reimagining of Twitter.
In the end, Elon assured Tesla stockholders that they would gain from Twitter. Additionally, he pledged to stop selling Tesla stock altogether. Investors in Tesla will have to judge whether he plans to honour his word.
“Tesla’s trademark is Elon. He needs to gather himself “. KoGuan Leo, a powerful Tesla stakeholder, has gone so far as to claim that Musk has “abandoned” his responsibilities at the automaker and has advocated for the appointment of a new CEO in his place.
The failure of Elon’s reimagined Twitter Blue, the advertisers who have suspended their activity on the platform, the growing concern over the rise of bigotry on the platform, and Elon’s troubling political tweets seem to be adding to the never-ending swirl of controversy surrounding the company are just a few of the issues that Insider has reported on for Twitter.
Ives maintained an outperform rating for Tesla in his note to investors, saying that despite indications that it won’t be the batch’s top performer, he expects Tesla’s rate of return to beat its competitors.
For his part, Munster warned Elon that if he does nothing to address the numerous problems brought on by the billionaire’s acquisition of Twitter, he will harm the company over the long term.
Additionally, anxiety is the larger market. Since Musk purchased Twitter at the end of October, Tesla’s stock has fallen 31%. Tracking the stock’s performance since Musk’s bid to acquire Twitter in mid-April, it has fallen by 52%.
It is important to remember that tech equities lost trillions of dollars in value this year as a result of falling consumer demand, inflation, and the general market correction from the absurd multiples witnessed the year prior.
In addition to Musk’s Twitter issues, Tesla has additional concerns. The firm is no longer the world’s leading manufacturer of electric vehicles. Competition for Tesla has increased in the US, China, and some regions of Europe as new competitors have established their market shares while conventional automakers have successfully introduced several hybrid vehicles and their EV models.
Only earlier this month did Bloomberg disclose that Tesla was reducing some of its production capacity in China by 20% to 30%, indicating that actual sales had fallen short of expectations. To increase sales, it has also been claimed that the EV manufacturer reduced the price of its vehicles in China. Although it was successful, BYD, a Chinese rival, finally defeated Tesla.
“Shortly, more activity and mounting investor resentment will push the Tesla Board to address some of these problems head-on. For Musk and Tesla, this is a crucial time “Ives wrote.
After Musk sold more Tesla stock, people had the following reactions:
The third-largest individual stakeholder in Tesla, Leo KoGuan, tweeted to his 47,000 followers, “Elon abandoned Tesla and Tesla has no operational CEO.” KoGuan, who calls himself Musk’s “fanboy,” has built up a stake in Tesla that is worth more than $3 billion.
KoGuan stated that he wanted a functional executive, like Tim Cook at Apple, to assume control of Tesla. “Elon is merely a contract worker. He works for our company. Elon was a proud father, and Tesla has matured. Not Elon but a Tim Cook-like executioner is required “She tweeted.
In a note to clients, Wedbush analyst Dan Ives stated, “The Twitter disaster continues as Musk leverages Tesla as his ATM to keep feeding the red ink at Twitter.”
Ives stated that he thinks Tesla stock is oversold. Despite this, Musk “continues to throw fuel in the smouldering fire around the Tesla tale by selling additional stock and producing Tesla brand erosion through his activities on Twitter,” according to Ives, who removed Tesla from Wedbush’s “Best Ideas” list in November.
Danny Moses, an investor in “The Big Short,” said on CNBC, “We’re getting frustrated because his attention span is being impacted.”
The founder of Moses Ventures, which has shorted Tesla’s stock, claimed that Musk’s brand was at risk due to the spectacle at Twitter.
“Tesla’s name is Elon. He needs to gather himself.” In a CNBC interview, seasoned Wall Street analyst Gene Munster from Loup Capital said what you just read.
Munster claimed that he has spoken to individuals who have shown reluctance to purchase Tesla automobiles, which he believes is due to Musk’s deteriorating reputation as a result of his more contentious actions on Twitter.
Senior financial analyst Susannah Streeter at Hargreaves Lansdown called Musk’s intention to sell more Tesla shares “another irritating move.” She emphasised that Musk had stated in April that there were no longer any plans to sell Tesla stock. This week saw a two-year low for Tesla stock.
Because Elon Musk has so much on his plate, “I think there is a legitimate concern that he is not giving Tesla the attention it deserves,” said Streeter. Additionally, “there are genuine concerns about whether Tesla could lose its place as one of the leading EV manufactures across the globe because many competitors are nipping at its heels,” she added.
edited and proofread by nikita sharma