Tesla shares fell nearly 7% on Monday
after talk by founder Elon Musk about forming a third political party as a result of his intensifying feud with President Trump.
When Musk asked his followers on X last week whether
it was time to create a new political party, 80% answered “yes.”
“Mr. Musk’s involvement in politics and his financial support for the president’s
campaign were once seen by investors as a benefit to Tesla, fueling a steep rise in company shares after the election last year,” according to The New York Times. “That association has now turned into a liability. Tesla
shares are down 40 percent from their peak in December.”
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The concern is that Musk will become further distracted by politics despite a tumultuous stint in the Trump
administration.
“Once close allies, Trump and Musk have recently been clashing over policy and traded jabs on social media,” according to the Los Angeles Times. “Whether aligned with Trump or against
him, Musk’s involvement with politics has alienated some investors who think his political maneuvering has distracted him from focusing on Tesla’s success.”
And customers aren’t happy either.
“Many of Musk’s liberal-leaning customers now denounce the brand in response to his role in the White
House,” according to the Los Angeles Times. “Some celebrities even made a statement by ditching their Teslas. The resale value of used Teslas plummeted early this year, indicating
a possible decrease in demand.”
The electric vehicle company lost more than $68 billion in market cap on Monday.
“Very simply Musk diving deeper
into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla
story,” Dan Ives, global head of technology research at Wedbush Securities, said in a note Sunday, according to CNBC.
“While the core Musk supporters will back Musk at every turn no matter what, there is broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political
track.”