Tesla (NASDAQ:TSLA) stock took a 10% dive yesterday on news that CEO Elon Musk is buying Twitter (NYSE:TWTR). That, in turn, dragged down other electric vehicle names like Lucid Group (NASDAQ:LCID) stock.
Should it really? I don’t think so.
The market is reacting because of Musk’s deal to buy Twitter for $44 billion and take it private. The deal caps a whirlwind month in which the billionaire entrepreneur started gobbling up Twitter shares, rejected an offer to join the board of directors and then made a take-it-or-leave-it offer to buy the entire company.
Musk has big plans for the social media platform, including making the code open source to improve transparency, adding an edit button and loosening the rules on content.
This means that Musk will now be running five companies — Tesla, Twitter, SpaceX, The Boring Company and Neuralink. And it’s fair to wonder if even someone as driven and brilliant as Musk has the bandwidth to do all of that.
But the other reason why Tesla is falling lies in Beijing. Twitter is currently banned in China. And Tesla does huge amounts of business in China, accounting for $4.65 billion in revenue from China in the first quarter of 2022. China is Tesla’s second-largest market.
Reuters already speculated that with Musk running both Tesla and Twitter, that China can effectively punish Tesla if someone on Twitter says something that the government doesn’t like. It’s not an outlandish scenario.
What does this have to do with LCID stock? Absolutely nothing. But Lucid was hurt yesterday by just being in the Tesla-Twitter fallout.
I expect that investors will change their tune about Tesla soon. And even if they don’t, Wall Street will eventually realize that a damaged Tesla could be good for Lucid stock. Lucid is a direct competitor to Tesla, after all, and should be able to capitalize on any TSLA stock weakness.
Headed by CEO Peter Rawlinson, who was the vehicle engineer for the Tesla Model S, Lucid already manufactures the 2022 Car of the Year by Motortrend. And the EV market in the U.S. is expected to grow to $725.14 billion by 2026. That’s a compound annual growth rate of 27.19%.
Elon Musk’s Twitter deal is no reason to be bearish on LCID stock. The market is just being a little irrational.
On the date of publication, Patrick Sanders was long TSLA. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.