Tesla founder and Twitter owner Elon Musk appears to be at a crossroads for both of the companies.
Perhaps in acknowledging the challenges he is facing, Musk posted a poll on Twitter Sunday night asking if he should step down as head of Twitter. More than 57% of the 17.5 million respondents voted yes.
As of press time, Musk had not confirmed his intent to abide by the poll results, but still, as a result of the news that Must might be stepping down, Wedbush on Monday maintained an “outperform” rating of Tesla, meaning its stock is expected to do slightly better than the market return.
Tesla’s stock has suffered “in a brutal way since the Twitter soap opera began,” says Wedbush analyst Daniel Ives in a release. The vote is not a surprise. Since Musk has taken over Twitter in late October, it has been “debacle of epic proportions.”
Sen. Elizabeth Warren expressed concerns to Tesla’s board chairman Robyn Denholm that Musk and the board may have violated their legal duties to the company since Musk bought Twitter.
Warren asked Denholm in a Dec. 18 letter to address alleged misappropriation of Tesla resources and conflicts of interest resulting from Musk’s purchase of Twitter.
The board is “responsible for ensuring that a controlling shareholder (especially one who is also a Chief Executive Officer, or CEO) does not treat the company as a private plaything,” the Democratic legislator from Massachusetts wrote.
Meanwhile, Oppenheimer downgraded its rating of Tesla to “perform” from “outperform” today. The brokerage and investment bank stated that “negative sentiment on Twitter could linger long term, limiting its financial performance and becom[ing] an ongoing overhang on Tesla.”
The company believes that Musk is “increasingly isolated as the steward of Twitter’s finances with his user management on the platform. We see potential for a negative feedback loop from departures of Twitter advertisers and users due to inconsistent standards resulting in increased financing needs that may lead to incremental Tesla sales just as Tesla's competitive environment intensifies.”
Oppenheimer also took a negative view of Musk’s operation of the social platform thus far.
“While we have understood Twitter’s potential cash needs as a risk for Tesla shares, we believe banning journalists without consistent defensible standards or clear communication in an environment where many people believe free speech is at risk is too much for a majority of consumers to continue supporting Mr. Musk/Tesla, particularly people ideologically aligned with climate change mitigation,” the company stated.
Longtime automotive analyst Sam Abuelsamid, a principal research analyst at Guidehouse Insights, says he “mostly agrees” with Oppenheimer’s assessments.
“There is also a strong possibility that the more people are exposed to the reality of who Musk is as opposed to the image that was cultivated over the past decade, a lot of current and potential customers may turn away from Tesla which would further hinder sales at the same time the company is facing dramatically increased competition in the EV marketplace,” Abuelsamid tells Marketing Daily.
“That combination could hinder sales at the same time that Tesla has significantly increased production capacity, leading to underutilized factories, which are a huge drain on margins.”
Beyond the problems Musk is having balancing Tesla and Twitter, Abuelsamid, who leads Guidehouse Insights’ E-Mobility Research Service with a focus on transportation electrification, automated driving and mobility, sees other problems at Tesla.
“Oppenheimer, like most other financial firms, seems to dramatically overestimate Tesla’s capability when it comes to automated driving,” Abuelsamid says, adding that he’s driven in a vehicle with a beta version of Tesla’s Full Self-Driving software and it's “nowhere near able to operate safely without close human supervision and the prospects for a robo-taxi service based on the Tesla approach are likely to be at least many years in the future if they happen at all."
“If the system can’t operate autonomously in a tunnel with no pedestrians or intersections, it’s clearly not ready for the real world,” Abuelsamid says.