Tesla shares fell to their lowest level in more than two years on Tuesday, marking the company’s worst day in eight months, as Elon Musk’s electric carmaker faces tough financial times.
The company’s stock has lost more than half its value since early October. Investors fear that Twitter takes up a lot of Musk’s time, now that he is the owner and CEO of the social network.
His tenure at the helm 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 Twitter users surveyed voted for him to resign. Experts say his erratic behavior has undermined confidence in Tesla, with shares down 73% from November 2021.
Tuesday’s defeat, which saw You’re here down 11.4%, also followed a Reuters report that the company planned to run a reduced production schedule in January at its Shanghai plant. The news has raised concerns about a drop in demand in the world’s biggest car market, amid rising numbers of Covid-19 infections in China.
“There’s no question there are demand fears,” said Great Hill Capital chairman Thomas Hayes, citing a reduction in delivery forecasts for Chinese rival Nio in the key market.
Hayes also added that Tesla shares are facing a “perfect storm” of high interest rates, tax-loss sales and stock sales by certain funds that hold a significant amount of Tesla stock.
Tax-loss selling occurs when an investor sells an asset at a capital loss to reduce or eliminate the capital gain realized by other investments for income tax purposes.
During this time, a Reuters analysis showed that prices for used Tesla cars were falling faster than those of other automakers, weighing on demand for the company’s new vehicles rolling off the assembly line.
musk before assigned Tesla’s recent struggles to price hikes from the Federal Reserve, saying “people will increasingly move their money from stocks to cash, causing stocks to fall.”
The billionaire himself has sold Tesla stock this year, selling nearly $4 billion of his own stock in Tesla to fund the deal to buy Twitter, which he bought for $44 billion. He said in mid-December he wouldn’t sell additional Tesla stock “for at least 18 to 24 months”. However, financial documents show he sold millions after making similar promises in April 2022.
Analysts have raised the possibility that Musk could be asked to resign as Tesla executive over his Twitter actions, as he is already facing a lawsuit over his alleged failure focus on Tesla due to outside companies.