One of the interesting questions is whether Elon Musk’s decision to buy Twitter last April played a significant role in the decine of Tesla’s value. The question can be answered. You would need to ask major shareholders – like institutional investors – who have dumped Tesla stock over the past eight months. In a parallel universe, perhaps Musk didn’t buy Twitter, never paid a moment’s attention to Twitter, and Tesla still went down a lot. But the fact remains that these two events happened at the same time – Musk acquired Twitter and Tesla stock plummeted. Since April 14, when he made the formal offer, Tesla is down more than 66%. Since Oct. 27, when the deal closed, it is down 51%. In all, Tesla is worth around $850 billion – with a B – less than it was at the start of 2022.
Now correlation is not etc. etc. But the destruction of $850 billion in value has caught the attention of everyone who studies business, and I am sure there are case studies being prepared at Harvard on this right now.
It is not Musk’s fault that the market bid his stock up to $400 a year ago. That’s all the fund advisors and institutions and the people who run our 401k’s. And it may not be Musk’s fault, completely, that gravity reasserted itself, and Tesla shares suddenly were like Wil E. Coyote on jet skates going off the cliff with an anvil.
The Twitter theory fans can argue that Musk, for half the country, the liberal half, became a MAGA Bond villain. These progressive types are also theoretically people more disposed to buy electric vehicles, and so Musk was basically flipping off his target market, which is never good.
Putting aside the partisan case, there is also an argument that the market became very concerned that a CEO who was already busy with an EV company and a rocket company was taking on a company in Twitter that would occupy much of his bandwidth, leaving little time for Tesla in an increasingly competitive EV market. Something like if Bill Gates in 1985 deciding that he wanted to buy the Dallas Cowboys and spend all his time learning how to draft quality linemen. The market said this is bad and started dumping Tesla.
It will take a lot of work to figure out why Wall Street turned dramatically against Tesla. The fascinating question now is whether Tesla is a great bargain. There is a saying that you should not try to catch a falling knife. And it is possible that Tesla is fairly valued at $110 and will remain at $110 for a long, long time. But it is also true that when Steve Jobs came back to Apple in 1997, he used his second chance to build a company that today is worth $2 trillion. I would suggest that Musk should dump Twitter completely