Tesla’s stock market rout created frustration that turned into revolt with investors.
This is unheard of in the Tesla community: Critics fired against Elon Musk, the co-founder and CEO of the electric vehicle manufacturer, considered the architect of the electric revolution in the automotive industry.
Until now, the billionaire has been revered by investors and fans of the company, who embrace his vision for Tesla (TSLA) – Get Free Report and generally support all of his wildest endeavors.
And why doubt him? Musk has helped Tesla, founded in 2003, avoid bankruptcy on several occasions and most recently in 2018 and 2019. He made it one of the biggest companies in terms of market capitalization. Tesla was one of the few companies in the world to reach the symbolic threshold of $1 trillion in market value, a feat achieved in 2021. Musk has promised that the threshold of $5 trillion will be crossed in the medium term.
But the unimaginable happened and caused a frustration that now amounts to a mutiny in the Tesla-Musk universe.
Stock Is Down By 61%
Tesla’s stock literally crashed. It had ended the year 2021 at $352.26 with a market capitalization around $1.1 trillion. But it is currently at $137.80 for a market capitalization of $435.1 billion. Basically, in one year, the stock of the car manufacturer has lost 61% of its value, while market capitalization has collapsed by nearly $680 billion.
As a result, Tesla shareholders have suffered a huge loss, something they have difficulty understanding, because the fundamentals remain solid even if there are uncertainties on the demand in the United States and China and a looming recession.
For these shareholders, especially retail investors, the cause of this fall in Tesla shares is Musk. They let him know publicly, something unprecedented and unthinkable a few months ago.
One of the most vocal is Ross Gerber, who has decided to put forward his candidacy for a position as a member of the board of directors. He holds Musk responsible for Tesla’s stock market crash and has repeatedly criticized the Techno King in recent days.
“Elon has now erased $600 bil of tesla wealth and still nothing from the Tesla BOD,” he lambasted on December 16 on Twitter. “It’s wholly unacceptable.” BOD stands for Board of Directors.
Gerber has just reiterated this criticism and has gone so far as to ask for a change at the head of the company. Basically, that Musk be replaced as CEO.
“Tesla stock price now reflects the value of having no CEO. Great job tesla BOD,” the investor said on December 20. “Time for a shake up. $tsla.”
Musk was quick to respond.
“Please tell us your great ideas, Ross …” the billionaire quipped.
“As i tweeted earlier… My three points,” Gerber answered. “1. Tesla needs a media and comms team. 2. Tesla needs a succession plan as well as clarify when Elon will be back from twitter. 3. Tesla needs to communicate about Elon’s stock sales and a stand still agreement should be made. $tsla”
To which the serial entrepreneur replied: “Go back and read your old Securities Analysis 101 textbook.”
Musk continued: “In simple terms: As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.”
This explanation is the one Musk already gave Gerber a few days ago. For him, it is the increase in interest rates by the Federal Reserve to fight inflation which is the main cause of the stock market crash of Tesla. The proof is that the stock market indices are all down this year, suffering from fears of a recession.
To a Twitter user, Musk said that perhaps his behavior had little impact on the Tesla stock. If nothing else, it would have presented a buying opportunity for investors.
“What’s comforting is that Elon won’t even entertain the idea that his behavior impacts the stock price,” the Twitter user commented.
“Maybe so, in which case … buying opportunity!” the billionaire responded. “I keep saying that Fed rate is insane, because data I’m seeing says we’re already in deflation. If true, then real rate of return of T-bills is roughly that of S&P500. Very smart investor I spoke to today said he’s shorting S&P…”
But for the billionaire’s critics, Tesla’s rout is due to his acquisition of Twitter. The billionaire decided to buy Twitter in order to, according to him, make the platform a place for free speech. Since making the takeover bid for the social network on April 22, the tech mogul has only been focused on Twitter.
He is omnipresent on the platform, attacks his perceived enemies and regularly creates controversy. The problem is that since the $44 billion bid for Twitter, Tesla’s stock has continued to fall. Musk finalized the deal on October 27, less than two months ago. Tesla’s stock lost nearly 39% of its value during this short period.
Analysts too believe that the destruction of Tesla’s stock value is largely due to Twitter. So when Musk announced on December 20 that he’s going to step down as CEO of the platform, Dan Ives, an analyst at Wedbush, saw this as “good” news for Tesla.
“Musk announces he will resign as CEO once successor found. Finally a good step in the right direction to end this painful nightmare situation for Tesla investors,” Ives commented.