Just a few weeks ago, Tesla CEO Elon Musk boasted that his company could eventually be worth more than Apple and Saudi Aramco combined. Not the way things have been going in recent days, however. Since Musk completed his controversial takeover of Twitter, Tesla shares have nosedived, losing nearly 8% of their value on Wednesday alone.
Technology stocks, in general, have been hammered of late by concerns about inflation, rising interest rates and inflation. Add the fact that Musk himself has sold off nearly $4 billion in Tesla shares since the Twitter deal was completed, on top of the $15.3 billion he sold off previously.
Things at Twitter have taken a chaotic turn since Musk named himself “Chief Twit.” It probably didn’t help when he tweeted Nov. 9, “Please note that Twitter will do a lot of dumb things in the coming months. We will keep what works & change what doesn’t.”
Stock takes a tumble
This may be one of the rare times when Tesla short-sellers are on the right track. Throughout the years, they’re repeatedly been burned as the company has defied skeptics and repeatedly gained ground on the stock market.
But as the final bell sounded on Wall Street Wednesday afternoon, Tesla shares closed at $177.59, only pennies higher than the day’s low. The EV company’s 52-week high reached $402.67 back in January.
Even before Wednesday’s plunge, Tesla had already seen more than $600 billion in market capitalization wiped out, its stock beginning the day down by roughly half for the year.
It certainly didn’t play well for Musk’s credibility. During the company’s third-quarter earnings call last month, he was as bullish as ever, despite revenues of $21.5 billion falling about $500 million below the Street’s consensus forecast. According to Musk, Tesla is on the cusp of a huge run-up in value, the South African-born entrepreneur forecasting its market cap would jump from $695 billion to more than $4 trillion.
It would top the combined worth of Apple and Saudi Aramco — at the time valued at $2.31 trillion and $2.09 trillion, respectively — Musk declared.
Still an impressive market cap
After Wednesday’s plunge, Tesla has a market capitalization of $556 billion. That is, of course, still a big number by auto industry standards. General Motors is currently worth $54.1 billion, with Toyota’s market cap sitting at $219 billion, the largest of any traditional automaker.
Musk remains one of the world’s richest people. But there are growing concerns about how he — and Tesla — will be impacted by what Dan Ives, the lead tech analyst at Wedbush Securities calls a “debacle of epic proportions.”
“The more he gets into Twitter, the more it becomes a quicksand type of deal,” the analyst said.
Since the sale officially closed on Oct. 27 things have gotten worse on a seemingly daily basis, according to critics. Musk has pulled a series of feints and reverses when it comes to Twitter’s policies on content moderation, triggering criticism across the political spectrum. He has come under fire for posting a false theory about the hammer attack on the husband of U.S. House speaker Nancy Pelosi. He has fired a large chunk of Twitter’s staff, many overseeing content and related operations.
In turn, advertisers by the score have canceled or suspended their accounts. That includes giants like GM and Pfizer. Even ads for Oreo cookies have been halted.
It doesn’t help that Twitter was already bleeding cash when Musk completed the takeover. And he faces the prospect of having to come up with about $1 billion annually just to cover financing on the debt he accrued.
The prospect that he will continue to sell off Tesla stock is one big worry. But with analysts expecting Twitter to take up a sizable chunk of Musk’s time, another concern is how his attention might be drawn away from his other businesses, including not only Tesla but also SpaceX.
Tesla has shown a robust ability to bounce back since going public more than a decade ago. But this latest crisis isn’t limited to the automaker itself. And with no clear solution to the “debacle” that Twitter has become, Tesla might find it more difficult to continue controlling its own financial destiny.