Tesla Dips Below $150 – What’s Happening?

Tesla’s (NASDAQ:) stock price has continued to underperform the market in December after losing nearly 15% in November. The electric vehicle (EV) maker’s shares are now on their way to closing lower for the fifth consecutive month, resulting in a 50%+ drop from their August high.

While Tesla Stock Plunges, Musk Conducts Another Twitter Poll

In a poll posted Monday, Elon Musk asked his Twitter followers whether he should step down as head of Twitter, promising to abide by the results of the vote. Over 57% of users voted in favor of Elon Musk stepping down from Twitter’s top role, while 43% wanted him to stay.

However, there was no word from the billionaire on whether he will actually act in accordance with the poll results and step down as head of the social media company. CNBC reported on Tuesday that Musk is “actively searching” for a person to replace him as Twitter CEO.

The poll came after a chaotic two months for Twitter under Musk’s reign, characterized by rapidly changing policies and decisions.

It is safe to say that Tesla investors were likely among those who voted “Yes” after growing tired of seeing the carmaker’s CEO getting distracted by his new social media platform. Tesla, which remains Musk’s primary source of wealth, saw its share price drop nearly 60% since April, when the 51-year-old billionaire’s intentions to acquire Twitter were made public.

The EV maker’s market value stood at more than $1.1 trillion on April 1, the last trading day before Musk revealed he bought a stake in Twitter. Since then, Tesla’s market value has plummeted by 58%, opening up a chance for rival carmakers to increase their market share.

“This has been a black eye moment for Musk and been a major overhang on Tesla’s stock, which continues to suffer in a brutal way since the Twitter soap opera began,” Wedbush analyst Dan Ives said.

Ives believes Musk stepping down would bode well for Tesla’s stock and indicate that the billionaire is “finally reading the room that has been growing frustrated around this Twitter nightmare,” he added.

Too Much Focus on Twitter

Since purchasing Twitter for $44 billion two months ago, Musk has introduced a myriad of policy changes to the platform, some of which have raised concerns among advertisers and users. Further, he has reduced half of the company’s workforce, let go of contract content moderators, and disbanded the board of trust and safety advisors.

The Tesla boss has also stopped enforcing coronavirus misinformation rules and requested criminal charges against Chief Medical Advisor and infectious disease expert Dr. Anthony Fauci. Shortly prior to posting the poll, Musk announced a significant Twitter policy change that banned users from linking to other social media platforms such as Facebook (NASDAQ:), Instagram, Mastodon, and others.

But the tweets announcing the policy change, posted by Twitter’s ‘Support’ account and the Twitter blog, were deleted with no further explanation on Monday. The move faced significant backlash and criticism, even from Musk’s proponents. The new Twitter CEO said he would not make more policy changes to the social media platform without asking for users’ opinions first.

All these headlines are creating an overhang for Tesla stock, with many long-term investors growing increasingly tired of Musk’s antics.

“Where before EV buyers were proud to drive their Teslas to their friends or show off Teslas in their driveways, now the Twitter controversy is hurting Tesla’s brand equity,” Gary Black, managing partner of the Future Fund LLC, which owns roughly $50 million worth of Tesla, tweeted.

Moreover, the fact that Musk had to sell around 22 million more Tesla shares last week for roughly $3.6 billion to fund the Twitter buyout facilitated another selloff in the EV stock. The latest sale means Musk has offloaded a total of 94,202,321 Tesla shares in 2022 at an average price of $243.46 per share, with pretax proceeds amounting to about $22.93 billion. The move came several months after Musk said “no further TSLA sales” are planned after April 28.

“Musk’s prior sales going back to November 2021 were expertly timed, so Tesla shareholders need to pay attention to Musk’s actions and not his words – or lack thereof when it comes to his recent selling,” said VerityData’s director of research Ben Silverman.

Despite his April statement, the world’s second-richest man sold Tesla shares several times after he bought Twitter. Following the takeover, Musk told employees he sold Tesla stock to “save” their business.

All This While Tesla Faces Weakening EV Demand

Earlier this month, Tesla cut car prices in the U.S., offering a $3,750 discount for Model 3 and Model Y vehicles sold during December. The move was in line with reports of weaker demand for new EVs in Tesla’s home market, as many customers are still waiting for a higher tax credit included in the Inflation Reduction Act.

The federal legislation will provide customers with a $7,500 tax credit for electric cars built using battery materials sourced from the U.S. The price discounts are shown in the inventory available on Tesla’s official website.

In spite of a meteoric rise since Tesla went public in June of 2010, the world’s biggest electric car manufacturer is witnessing weaker demand in some of its biggest markets, including the U.S., China, the U.K., and Australia. Meanwhile, it is precisely such locations where the company’s inventory continues to build up as more ships deliver Tesla cars as we head into 2023.

Summary

Tesla stock is still experiencing severe selling pressure in December as CEO Elon Musk’s Twitter drama continues to play out. Tesla investors will now hope that Musk will fulfill his promise and abide by the results of the latest Twitter poll, which should see him hand over the CEO of Twitter role to someone else. This way, the billionaire could focus on Tesla again as the company faces weakening EV demand amid a complicated macroeconomic environment.

***

Shane Neagle is EIC of The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.