Elon Musk made decisions penalizing Tesla stock
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(News Bulletin 247) – The electric vehicle specialist wiped out nearly $700 billion in market capitalization over the year as a whole. Difficulties at its Shanghai site and rising interest rates weighed on the group’s valuation. The Twitter soap opera and the procrastination of its general manager, Elon Musk, have seriously driven the point home.

Tesla has clearly stalled on the stock market this year. The action of the Wall Street star, whose valuation makes other car manufacturers dream, slips by more than 50%

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since January 1, wiping out more than $700 billion in market capitalization. To the point of abusing the status of the richest man in the world of its managing director and co-founder, Elon Musk, whose 14% stake in Tesla remains the main asset. The CEO of LVMH, Bernard Arnault, has thus passed this week several times ahead of the South African in the real-time ranking established byForbes

their fortunes close to 190 billion dollars (each).

Confinements and logistical problems

Tesla had a particularly trying year in 2022, with many headwinds. The automaker specializing in electric vehicles has not been spared by the zero-Covid policy in China, its second country in terms of revenue in 2021, behind the United States, with 13.84 billion dollars, or nearly a quarter of the total.

Its Shanghai “gigafactory”, one of the group’s six in the world and the largest in terms of capacity, suffered the full brunt of the spring confinements decreed in the city.

This has weighed on the site’s production to around 40,000 vehicles, according to Bloomberg. This site could design up to 450,000 vehicles per year (37,500 per month) but the factory was upgraded this summer by the group to reach a maximum of 1 million per year. [comme BYD ou SAIC Motor, par exemple, NDLR] The manufacturer also had to agree to price reductions in the second world economy “in the face of competition from local players

which is intensifying,” said UBS. This raises questions about the group’s growth potential in the country.

Beyond China, Tesla, like many other automakers, has faced logistical disruptions as well as rising raw material, shipping and transportation costs. This led it to publish deliveries in the third quarter both below expectations (343,830 units published against 359,000 expected) and its production of 366,000 vehicles, an extremely rare occurrence for the Californian manufacturer. Its financial director, Zachary Kirkhorn, has also indicated that the group could miss its annual objective, that is to say a 50% increase in its deliveries.

Doubts about the maturity of the autonomous vehicle

“Nor should we overlook what happened to autonomous driving, which remains a big chunk of Tesla’s long-term valuation potential,” said an automotive analyst. Full self-driving (FSD) is one of Elon Musk’s great promises and a source of appeal for the brand. But Tesla’s dedicated software failed to obtain regulatory approvals this year, failing to meet the requirements of US regulators. [avec un degré d’autonomie] Above all, Volkswagen and Ford ended their autonomous vehicle joint venture, Argo, in October. This decision “came to cast doubt on the timetable that would make it possible to achieve a truly autonomous vehicle.

level 5, which weighed on Tesla”, judges the analyst previously quoted.

The rise in interest rates due to the tightening of the US Federal Reserve’s monetary policy also plays a role, via several phenomena. First, it undermines the valuations of growth stocks with very high multiples and therefore sensitive to rising rates. Which is totally the case with Tesla. Next, these rate hikes tighten credit conditions for households, and therefore complicate the financing of purchases of discretionary goods such as automobiles.

“It does not help, especially in the United States, Americans use a lot of leasing systems (rentals with option to buy)”, judges the analyst specializing in the automotive sector. These fears about demand in an economic environment mixing recession and inflation contributed to Tesla’s plunge.

The Twitter file as the source of the recent stock market ordeal

Finally, it is impossible to talk about the fall in the price of Tesla without mentioning the soap opera Twitter, which led Elon Musk to buy the social network at the end of October for 44 billion dollars after many adventures. The billionaire had to draw on his stake in Tesla to finance part of this gargantuan transaction. The director general of the manufacturer has thus carried out several sales – the last of which at the beginning of November – for a total of 19 billion dollars since April. These sales operations naturally weigh on the price of Tesla.

According to information from Bloomberg, on Friday, Elon Musk’s bankers would also consider setting up a loan secured on Tesla shares, to replace another loan to Twitter’s liabilities, of 3 billion dollars, for a rate of interest of 11.75%. The goal is to reduce the interest charges paid by the social network, estimated at 1.2 billion dollars per year, according to Bloomberg. Representatives for Musk interviewed by Bloomberg did not comment.

But beyond these rather mechanical aspects, the Twitter file penalizes Tesla through other, more indirect channels. Since his takeover of the social network, Elon Musk has taken power at Twitter, appointing himself general manager, laying off numerous employees and making a whole series of sometimes dubious strategic decisions. Musk’s brutal choices have thus exposed a violent corporate culture that could tarnish Tesla’s image.

According to a survey conducted in late November by Morgan Stanley, three-quarters of institutional investors polled by the bank believed that the situation at Twitter had contributed significantly to the recent drop in Tesla shares.

Since the finalization of the takeover of the social network, the title has lost 25% while the S&P500 has increased by 1.5% over the same period.

Elon Musk’s action at Twitter “could affect consumer confidence in Tesla,” Morgan Stanley said. The American bank also fears that certain commercial partners of the manufacturer will reduce their collaboration, so as not to see their reputation indirectly associated with the controversies at Twitter. [les investisseurs tablant sur une baisse, NDLR] “Musk has succeeded where the ‘bears’

have failed for years: breaking Tesla stock,” Wedbush analyst Daniel Ives lamented in November, quoted by Reuters. “The Twitter circus is slowly starting to impact the value of the hitherto pristine Tesla brand” , he lamented.

On Wednesday, Bloomberg even echoed the dissatisfaction of an investor, Trevor Goodwin, who almost completely sold his position in Tesla, castigating Elon Musk’s mistakes with Twitter. “It’s almost as if he’s abandoned us in favor of his new mission,” he told the agency.

Still, the forfeiture of Tesla does not only make people unhappy. According to data analysis firm S3 Partners quoted by CNN, short sellers on the stock have made gains of more than $11 billion since the start of the year.