It's a total stock market disaster for Tesla.
Even for the world leader in electric vehicles, this is worrying, even alarming.
This will not be a year to remember for the carmaker's investors. And if they do, they will probably remember that in a few months, the value of a portfolio can completely melt away.
The company led by Elon Musk had a market capitalization of $1.13 trillion on Dec. 31, 2021. The stock ended the year at $352.26. Almost a year later, all these figures have been more than halved.
The market value is only slightly over $474 billion, meaning that nearly $640 billion of stock market capitalization evaporated in 12 months. Tesla’s stock is currently trading at $150.23, which represents a 57.4% year-on-year drop.
The Fundamentals Remain Solid
The fundamentals of the company appear solid, even if there are some questions which relate to the demand in China and in the United States, where the carmaker did something unheard of: promotions after the production had exceeded deliveries in the third quarter.
"On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year, as noted, just above," Chief Financial Officer Zachary Kirkhorn told analysts during the third quarter earnings' call. "This means that, again, you should expect a gap between production and deliveries in Q4, and those cars in transit will be delivered shortly to their customers upon arrival to their destination in Q1."
In a sign that things are not going the way Musk wants, the billionaire has brought Tom Zhu, the boss of Tesla in China, to run the Tesla factory in Austin, which manufactures the Model Y SUV/crossover, and soon the long-awaited Cybertruck, Tesla's futuristic pickup truck, whose production should start in mid-2023.
For Tesla shareholders, all these questions are secondary. For a growing number of them the problem is Musk. Yes, Musk, their big boss and the architect of Tesla's success.
They trusted him blindly. They had an unparalleled admiration for him and knew that, as long as he was present, their investments were in good hands and would bear fruit.
But this year, something unusual happened: Musk personally decided to buy Twitter in order to, according to him, make the platform a place for free speech. Since making the takeover bid for the social network on April 22, the Techno King, as he is known at Tesla, has only been focused on Twitter.
He is omnipresent on the platform, attacks his supposed enemies and regularly creates controversy. The problem is that since the $44 billion bid for Twitter, Tesla’s stock has lost 55.2% of its value and its market capitalization has shrunk by more than $580 billion. Musk finalized the deal on Oct. 27, less than two months ago. Tesla’s stock lost 33.3% of its value during this short period.
Initially, shareholders and individual investors kept silent about their leader's Twitter adventure; but when the Tesla stock started to wobble, they started to indirectly ask Musk to refocus on Tesla, as for them, there is no doubt that the automotive group is paying for Musk's tribulations with Twitter.
Is Musk the Problem?
With no reaction from Musk, they started to openly speak out and criticize him. Shareholder criticism is now turning into a revolt, unheard of in the Tesla community, where Musk has been revered until now.
"Elon has now erased $600 bil of tesla wealth and still nothing from the Tesla BOD," lambasted Ross Gerber, one of Tesla's most vocal shareholder on Dec. 16 on Twitter. "It’s wholly unacceptable." BOD stands for Board of Directors.
Gerber said that he was going to try to get on the board: "I’ve notified tesla that I wish to run for the BOD of Tesla. I wish to be added to the proxy statement. It’s time tesla shareholders have a voice on the BOD as well as proper communication with the public."
Undoubtedly surprised by such a harsh attack, Musk blamed Tesla's stock market woes on the Federal Reserve's monetary policy, as he had already done a few days earlier. The central bank has been aggressively raising interest rates to fight inflation at its highest level in 40 years. This policy will cause a so-called hard landing, aka a recession, many economists have warned.
"Tesla is executing better than ever!" the billionaire responded to Gerber. "We don’t control the Federal Reserve. That is the real problem here."
Musk provided more explanation on Dec. 17: "Securities Analysis 101. As the 'risk-free' real rate of return from Treasury Bills approaches the much riskier rate of return from stocks, the value of stocks drop. For example, if T-bills and stocks both had a 10% rate of return, everyone would just buy the former."
"The Fed hasn’t helped," quipped a Twitter user. "But the real problem is shareholders are concerned that Twitter is consuming too much of your time. It’s a valid concern."
It was then that Musk tried to justify himself by saying that he had just finished a meeting on the progress of production at Tesla's Austin factory.
"I literally just finished my meeting going over Giga Texas production progress," the serial entrepreneur responded to the criticism.
It is rare to see Musk defend himself like this. Ordinarily, the billionaire is rather abrasive, counter-attacking when he is put in a tight spot. These attempts to justify himself suggest that he is aware that a revolt is mounting among shareholders, who are only seeing their investments shrink.
"Folks, here is the love story," tweeted Leo KoGuan, one of Tesla's largest individual shareholders. "Elon married U (SH), nightly he whispers beautiful words, 'I am the first in the last out', yours forever and ever, never leave you, grow old and rich together."
"Later, he is gone missing, sleeping in another’s bosom. U are sleeping alone, heartbroken," the investor added.