At the start of 2022, Tesla ranked as one of the world’s most valuable companies, with a market cap of $1.2 trillion. Its CEO, Elon Musk, was the wealthiest person on the planet, with his ownership stake in Tesla giving him a net worth of $300 billion, along with winning the admiration of many devoted investors.
“Tesla bulls, the future rainbow are here and now,” Leo KoGuan, who describes himself as the third-largest individual shareholder of Tesla, tweeted in January 2022. “Smile to your fortunate self.”
As the year draws to a close, some of those investors are questioning his judgment and his commitment to the pioneering electric car company. Their disenchantment centers on Musk’s October purchase of Twitter for $44 billion, which has consumed the billionaire’s attention as well as weighed on Tesla shares.
Perhaps most galling for Tesla investors is that Musk himself has sold almost $40 billion of his own stake in the company in the last year, according to a report from Wedbush Securities — belying his bullish pronouncements about the automaker’s prospects.
With Musk selling billions in Tesla shares and investors questioning his focus, the car company’s stock has shed more than $700 billion in value. On Wednesday, Musk filed a regulatory document indicating he had sold an additional 22 million shares of Tesla for about $3.6 billion — a move decried by investors, who retweeted Musk’s pledge in April of “[n]o further TSLA sales planned after today.”
Indeed, some prominent investors are now seeing dark clouds instead of rainbows.
“Elon abandoned Tesla and Tesla has no working CEO,” KoGuan wrote Wednesday on Twitter. “Tesla needs and deserves to have working full time CEO.”
Investors now feel abandoned by Musk, Dan Ives, an analyst at Wedbush Securities who covers Tesla, told CBS MoneyWatch. “For investors, the clock has struck 12 — frustration has massively built, and Musk appears to be doubling-down, not backing away.”
Tesla didn’t immediately return a request for comment.
Using Tesla “as an ATM”
Prior to Musk’s purchase of Twitter, the billionaire was heralded as a visionary entrepreneur who could change the world with his innovative companies: Tesla, through the adoption of electric vehicles, and SpaceX, with its goal of sending humans into space.
But another passion of Musk’s — the defense of free speech — emerged through his surprising pursuit of Twitter. Jim Cantrell, a founding member of SpaceX, told CBS News that the billionaire wanted “to stop the ability of nation-states to restrict individual liberties. He’s always been a deep free-speech advocate.”
Twitter presented a path for Musk to achieve that goal, as he had been especially critical of the social-media company’s content moderation standards. But clinching that deal wasn’t cheap, with Ives estimating that Musk’s $44 billion purchase price for Twitter represented a $20 billion overpayment.
Due to the steep price for Twitter, Musk has had to slash costs dramatically at the social media network, cutting more than half the company’s staff. But he also needed to tap his greatest source of wealth to fund the company — Tesla stock.
“One of investors’ bigger concerns is that Musk is using Tesla as an ATM machine,” Ives said. “That has been a massive overhang on Tesla’s stock.”
Other issues are emerging with Musk’s ownership of Twitter that extend beyond investor anxieties over the CEO’s stock sales. Musk’s dedication to “free speech” prompted changes at the company such as reinstating formerly banned accounts, like those belonging to former President Donald Trump and far-right Republican lawmaker Marjorie Taylor Greene.
Researchers have tracked a massive spike in hate speech since Musk’s takeover. And Musk himself has courted controversy and condemnation with some of his recent tweets, such as a viral post on Sunday that simultaneously made fun of pronoun usage while indicating that he believes Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, should be prosecuted, although he did not specify why.
“My pronouns are Prosecute/Fauci,” Musk tweeted on Sunday.
He also has retweeted far-right memes and beliefs that, according to the Washington Post, have energized the QAnon movement, a fringe group that peddles a range of conspiracy theories.
Musk’s determination to stir up controversy could tarnish the Tesla brand for consumers who find far-right and QAnon ideology repugnant, analysts and investors say.
“Elon Musk is a brilliant business leader. He will realize soon (if not already) that his polarizing political views are hurting customer perceptions of Tesla EVs,” Gary Black, managing partner of the Future Fund and a Tesla shareholder, wrote on Twitter on Wednesday. “Customers don’t want their cars to be controversial. They want to be proud as hell to drive them — not embarrassed.”
That could pose a real risk for Tesla sales, especially as rival automakers are rolling out their own EVs and trying to grab part of Tesla’s market share, Ives pointed out.
“Ultimately, you’re alienating 50% of the population for someone who is selling products to the masses,” he said. “Right now they are popping champagne in the 313 area code because it’s a benefit for GM, Mercedes and others in this EV arms race,” Ives added, referring to the area code for Detroit, where U.S. automakers are piling into electric cars.
Coming up: Investor activism
The combination of slumping stock, a distracted CEO and concerns about the Tesla brand being tarnished are cooking up the potential for investor activism, Ives noted.
KoGuan and others are already urging Tesla to initiate a share buyback, which is when companies repurchase their own shares on the open market. Because it reduces the number of publicly traded shares, such a step can help shore up or even boost a company’s stock price.
“We believe its getting to the point that more activism and growing investor frustration will force the board of Tesla to confront some of these issues head-on in the near term,” Ives wrote in a Thursday research note.