Tesla shares fell on Tuesday to their lowest in more than two years, marking the company’s worst day in eight months, as Elon Musk’s electric carmaker confronts a rocky financial period.
The company’s stock has lost more than half its value since the start of October. Investors worry that Twitter is taking much of Musk’s time, now that he is the social network’s owner and CEO.
His tenure as head of the platform has been marked by chaos as he implements – and often reverses – a host of new policies. Musk recently said he would find a new CEO to replace him after most polled Twitter users voted for him to step down. Experts say his erratic behavior has undermined confidence in Tesla, with shares down 73% from November 2021.
Tuesday’s loss, which saw Tesla shares drop 11.4%, also followed a Reuters report that the company was planning to run a reduced production schedule in January at its Shanghai plant. That news sparked worries of a drop in demand in the world’s biggest car market, amid a rising number of Covid-19 infections in China.
“There’s no question there are demand fears,” Great Hill Capital chairman Thomas Hayes said, citing a delivery forecast cut from Chinese rival Nio in the key market.
Hayes also added that Tesla’s stock was facing a “perfect storm” of high interest rates, tax-loss selling and share sales by some funds that hold a significant amount of Tesla stock.
Tax-loss selling is when an investor sells an asset at a capital loss to lower or eliminate the capital gain realized by other investments for income tax purposes.
Meanwhile, a Reuters analysis showed that prices of used Tesla cars were falling faster than those of other carmakers, weighing on demand for the company’s new vehicles rolling off the assembly line.
Musk previously attributed Tesla’s recent struggles to rate hikes from the Federal Reserve, stating “people will increasingly move their money out of stocks into cash, thus causing stocks to drop”.
The billionaire himself has offloaded Tesla stock this year, selling nearly $4bn of his own shares in Tesla to finance the deal to buy Twitter, which he bought at $44bn. He said in mid-December he would not sell additional Tesla stock “for at least 18 to 24 months”. However, financial filings show he sold millions after making similar promises in April 2022.
Analysts have raised the possibility of Musk being asked to step down as executive at Tesla over his actions at Twitter, as he is already facing a lawsuit over his alleged failure to focus on Tesla due to outside ventures.