Musk’s Colossal Wreck

December 17, 2022

Bloomberg:

“Musk risk” has been weighing on Tesla Inc.’s stock for some time now. But it reached another level this week as the electric-vehicle maker’s mercurial leader stirred up even more controversy and sent the company’s shares plunging.

Tesla’s stock price sank 16% over the last five sessions for its worst week since the pandemic struck in March 2020. By comparison, the S&P 500 Index and Nasdaq 100 indexes declined less than 3%. The performance is even uglier looking further back, with the shares tanking 43% so far this quarter as prominent Wall Street analysts dial back their expectations for Elon Musk’s company and the electric-vehicle industry as a whole.

The swarm of activity surrounding Musk and Tesla just this past week has been overwhelming. The selloff pushed the company below a market value of $500 billion for the first time in more than two years. Goldman Sachs and RBC Capital markets slashed their price targets on the stock. Then Musk raised eyebrows when he sold almost $3.6 billion of Tesla shares, possibly to help refinance debt from his purchase of Twitter Inc. 

In addition, Musk was toppled from the peak of the Bloomberg Billionaires Index, meaning he’s no longer the richest person in the world. And his controversial management of Twitter’s social media rules, which have soured some of Tesla’s customer base, amped up Thursday when he suspended the Twitter accounts of well-known journalists at outlets like the New York Times and Washington Post.

“I think the stock is only going to go down from here,” said Catherine Faddis, senior portfolio manager at Fernwood Investment Management. “Elon Musk has damaged his reputation with this Twitter business and all the negative news flow.”

As concerns about the economy and a recession next year continue to grow, Tesla’s outlook is likely to darken. Demand for its expensive electric vehicles could wane as high inflation and rising interest rates sap demand from consumers reluctant to spend on big ticket items. The specter of a slowdown will probably have equity investors seeking safety in stable buys rather than growth stocks like Tesla.

“When you have a high-octane growth stock that relies on projections that are years away, confidence is very important, and once the confidence is broken the stock could break down as support ebbs away,” Faddis said.

Bloomberg Opinion:

At many other struggling companies, an activist investor would have swooped in to clean up this mess by now, Liam Denning notes. But Tesla is a special unicorn, whose CEO is a god-king with robust defenses against investors. One of those is a board made up of Elon Musk’s brother, several mannequins and a life-size cutout of Michael Jordan riding a model train. Good luck getting any influence there.

————————————–

I met a traveller from an antique land,

Who said—“Two vast and trunkless legs of stone

Stand in the desert. . . . Near them, on the sand,

Half sunk a shattered visage lies, whose frown,

And wrinkled lip, and sneer of cold command,

Tell that its sculptor well those passions read

Which yet survive, stamped on these lifeless things,

The hand that mocked them, and the heart that fed;

And on the pedestal, these words appear:

My name is Ozymandias, King of Kings;

Look on my Works, ye Mighty, and despair!

Nothing beside remains. Round the decay

Of that colossal Wreck, boundless and bare

The lone and level sands stretch far away.”

Percy Bysshe Shelley

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4 Responses to “Musk’s Colossal Wreck”

  1. rhymeswithgoalie Says:

    One of those is a board made up of Elon Musk’s brother, several mannequins and a life-size cutout of Michael Jordan riding a model train.

    OK, I had to look that up: It’s a Home Alone reference:

  2. MorinMoss Says:

    I have to wonder exactly why Musk tried so hard to kill the deal & then caved without concessions. Putting on my conspiracy hat, something he wanted badly to keep secret must have been about to drop & it was worth billion$ to keep it hushed up.
    To add to the list of genius moves he’s now stopped paying rent for all Twitter’s offices, is shortchanging vendors & denying severance to those who didn’t want to sign up to be superduper hardcore.

    • greenman3610 Says:

      first time I’ve seen anything like this.
      I wish them good luck, sounds cool, would like to know more – but they have a high bar to clear.


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