Tesla shares have taken a significant hit, plunging 7 percent by noon in New York after CEO Elon Musk revealed his intention to launch a new political party.
This announcement came on the heels of a public dispute with President Donald Trump regarding tax legislation signed into law on the same day.
Trump dismissed Musk’s political foray as ‘ridiculous,’ a sentiment echoed by many analysts who are increasingly concerned about Musk’s focus on politics rather than Tesla’s core business.
Analyst Dan Ives from Wedbush Securities expressed that investors are weary of Musk’s political engagements, particularly during a critical time for Tesla as the company struggles with declining sales.
“Musk diving deeper into politics and trying to challenge the Beltway establishment is exactly the opposite direction that Tesla investors want him to take during this crucial period for the Tesla story,” Ives noted in a recent commentary.
Investors had initially felt relief when Musk stepped back from his political pursuits after leaving the Trump Administration, but this latest turn has renewed concerns.
Musk’s political ambitions have put Tesla in a precarious position, especially as Trump has threatened to withdraw billions of dollars in federal subsidies that benefit Musk’s various companies.
Investment adviser Shawn Campbell, who holds Tesla shares, articulated the sentiment of many Tesla investors, saying, “I, and every other Tesla investor, would prefer to be out of the business of politics. The sooner this distraction can be removed and Tesla gets back to actual business, the better.”
The ramifications of Musk’s announcement could be severe; Tesla stands to lose over $80 billion in market valuation if the current trends persist.
Additionally, traders are eyeing potential profits of around $1.4 billion from short positions on Tesla shares amid this turmoil.
Musk’s recent actions also cast doubt on the effectiveness of Tesla’s board, which has faced criticism for its lack of oversight regarding Musk’s contentious behavior.
Robyn Denholm, chair of the board, previously denied speculation that board members were seeking to replace Musk, but growing discontent may lead to a change in dynamics.
“This is exactly the kind of thing a board of directors would curtail—removing the CEO if he refused to limit these kinds of activities,” stated Ann Lipton, a business law expert at the University of Colorado Law School.
The link between Tesla’s future and Musk is indisputable, especially since he is the largest shareholder and plays a pivotal role in the company’s identity and market performance.
According to data from the London Stock Exchange Group, Musk’s vast wealth is largely tied to his Tesla stock holdings, making the CEO’s focus and actions critical to Tesla’s success.
Despite the ongoing turmoil, it remains unclear whether Tesla’s board will take definitive action to rein in Musk’s political ambitions or maintain the status quo.
As Elon Musk continues to navigate his entrepreneurial endeavors alongside his political interests, Tesla shareholders are left hoping for a swift return to business-focused leadership.
image source from：aljazeera
