Tesla Slides On Concern Musk’s New Party Will Worsen Slump
Tesla’s stock slid 7.4% as of 11 a.m. Monday in New York, wiping out $16.7 billion from his net worth.
Tesla Inc. shares fell after Elon Musk announced he’s forming a new political party, digging deeper into a pursuit that’s been a drag on his most valuable business.
The chief executive officer announced over the weekend that he’ll take on Republicans and Democrats with the “America Party,” focusing on House and Senate seats for the next 12 months. After that, backing a candidate for president isn’t out of the question, Musk wrote on X.
Tesla’s stock slid 7.4% as of 11 a.m. Monday in New York, wiping out $16.7 billion from his net worth, according to the Bloomberg Billionaires Index. If that drop were to hold, it would be the biggest decline for the shares since Musk’s initial falling out with Donald Trump over the president’s tax bill in early June.
The stock has declined 28% this year as the CEO’s politicking has hurt Tesla’s standing with car buyers.
“Investors are growing tired of the distraction at a point when the business needs Musk’s attention the most and only see downside from his dip back into politics,” Jed Dorsheimer, an equity analyst at William Blair, said in a note Monday, downgrading Tesla to the equivalent of a hold.
Musk has yet to provide much detail about his political party, and there’s no indication he’s filed official paperwork with the US Federal Election Commission. His emergence as the leading spender during last year’s election cycle further complicated the task of running half a dozen companies pursuing everything from artificial intelligence to sending rockets to Mars.
Devoting resources and attention to a new political party runs counter to what Musk told Tesla investors he’d do during the company’s last earnings call. He vowed to allocate “far more” of his time to the company after his work for the Trump administration ended in May.
“The board is going to have to get involved,” Dan Ives, an equity analyst at Wedbush Securities, told Bloomberg Television, saying he was frustrated as a supporter of Tesla. “There’s a line in the sand that he’s now starting to cross.”
Musk and Robyn Denholm, Tesla’s board chair, didn’t immediately respond to requests for comment.
Tesla disclosed in April that the board had established a special committee to consider compensation matters involving Musk. The company is appealing a Delaware court’s decision to void an unprecedented pay package arranged for the CEO in 2018, in part on the grounds that it was excessive for a less-than-full-time executive.
James Fishback, CEO of investment firm Azoria, sent a letter to Tesla’s board saying Musk had undermined confidence in the company’s future.
“You have a CEO who is putting personal political ambitions ahead of his obligations, and that is to the detriment of shareholders,” Fishback said Monday on Bloomberg TV.
Musk told Bloomberg News in May that he was committed to still leading Tesla five years from now and expected to pull back from Washington.
“I think, in terms of political spending, I’m going to do a lot less in the future,” he said. “I think I’ve done enough.”
During that same interview, Musk said that Tesla’s sales had “already turned around,” and that his actions had opened up a path to consumers on the political right to offset customers the company was losing on the left.
Musk’s comments didn’t bear out in the worldwide sales figures Tesla reported last week. The company posted a 13% drop in second quarter deliveries, almost identical to its year-over-year decline in the first three months of the year.
