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Elon Musk tries to elucidate why Tesla shares are tanking

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Shares in electric vehicle maker Tesla sank to a latest 52-week low on Tuesday, closing around $138 per share, or 8% lower for the day in an otherwise mixed day for stocks.

CEO Elon Musk tried responsible the sinking price partly on macroeconomic aspects.

Long-time Tesla bull Ross Gerber wrote in a tweet, “Tesla stock price now reflects the worth of getting no CEO. Great job tesla BOD – Time for a shake up. $tsla.” Gerber has launched an off-the-cuff campaign to have fellow shareholders vote to appoint him to Tesla’s board of directors.

Musk replied, in a tweet, “As bank savings account rates of interest, that are guaranteed, begin to approach stock market returns, that are not guaranteed, people will increasingly move their money out of stocks into money, thus causing stocks to drop.”

Elon Musk speaks during a press conference at SpaceX’s Starbase facility near Boca Chica Village in South Texas on February 10, 2022.

Jim Watson | AFP | Getty Images

But Tesla’s stock has dropped greater than other larger automakers since Musk announced his plans to purchase Twitter in Apr. 2022. Since that date, Tesla shares are down 59%, versus 26% for Ford and 12% for GM. The S&P 500 is down 14%.

The Tesla chief has loads of distractions, as Gerber notes: Musk has been stirring controversy as the brand new owner and CEO of Twitter, the social media giant which he acquired in a leveraged buyout in late October, and can be the CEO of a significant defense contractor, SpaceX.

Musk sold billions of dollars of his Tesla holdings to finance the Twitter deal, including a $3.6 billion sale earlier this month.

He told Twitter employees he sold Tesla shares to “save” their business while proceeding to chop greater than half of staff at the corporate and rolling out a bunch of product and policy changes, a few of which he later reversed.

While Musk has been focused on his latest role as “Chief Twit” since late October, Tesla has been offering discounts and incentives to sell cars in China, where it operates a significant factory in Shanghai; fighting to make its latest factories in Austin, Texas, and Brandenburg, Germany, efficient; and facing persistent supply chain challenges endemic to the auto industry, together with soaring energy prices in Europe which can reduce the appeal of a battery electric vehicle for a lot of drivers.

Read more about electric vehicles from CNBC Pro

Those, amongst other challenges, led Mizuho Securities and Evercore ISI to scale back their Tesla price targets on Tuesday.

Mizuho Securities analysts wrote in a note, that “near-term, we see potential weakness in Tesla sales as macro headwinds and a weaker consumer could drive lower demand for higher-priced EVs.” The firm remains to be bullish Tesla long-term, citing the corporate’s latest factories as a competitive advantage, and latest electric vehicle tax credits on the horizon within the US which could “speed up demand” domestically. In China, some EV credits are expiring as of the beginning of 2023. The firm has a price goal of $285 and a buy rating on shares of Tesla.

A Vanderbilt University assistant professor, Joshua White, who formerly worked as an economist for the U.S. Securities and Exchange Commission, told CNBC, Only among the drop in Tesla’s value might be blamed on rates of interest. Twitter overhang is one vital component. China is one other huge component. We still do not know if China might be open all the way in which, and we see there’s supply and demand pressure here in light of the rise in covid cases, and disruptions.”

He also said Elon Musk could have lost shareholders’ trust when he said in April that he didn’t plan to sell more of his Tesla shares, but went ahead and sold billions of dollars’ more.

“He seems to sell equity in really large blocks, say ‘I’m done and I’m not selling anymore.’ But talk is affordable. He says that after which sells more shares. So the more you say that and investors think he’s probably not done? The less confident they might be that the worth goes to bounce back.”

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