Since Elon Musk finalized his acquisition of Twitter, operations at the social media platform have spiraled out of control. After implementing large-scale layoffs, he has had to walk some back all while dealing with advertisers taking their business elsewhere. More recently, he floated the possibility of a Twitter bankruptcy, sending more negative shockwaves down Wall Street.
While the social media company is now private, Tesla (NASDAQ:TSLA) is not and while its CEO is otherwise occupied, it has been trending downward. Andy Wu of the Harvard Business School recently speculated that Musk may sell more TSLA stock in order to bail out Twitter. But given how Tesla has been performing lately, that may not be a good idea. Since Musk assumed control of Twitter, TSLA has fallen more than 16% and shows no signs of slowing down.
Let’s take a look at what investors can expect from Musk and from Tesla.
What’s Happening With TSLA Stock
This week is off to a rocky start for TSLA stock as Musk shows no signs of shifting focus. Shares fell this morning and although they have rebounded slightly, the stock is down almost 2.5% for the morning as of this writing. TSLA enjoyed a slight boost as markets rebounded last week but it remains in the red by almost 7% for the month. There’s no getting around the fact that so far, Tesla has been the biggest loser of Musk’s Twitter acquisition.
Wall Street was never excited about Musk taking over another very different company. His plans to create one overarching company to encompass Tesla, Twitter and his other non-public ventures was exactly what investors didn’t want to see. And as InvestorPlace pointed out, plenty of experts agreed that Musk taking over Twitter would sink Tesla stock.
Now that list has grown as Musk’s handling of Twitter has generated considerable speculation as to his ability to run two sector-leading companies. InvestorPlace Markets Analyst Thomas Yeung recently laid out several reasons why Musk may have inadvertently pushed TSLA stock into a race to the bottom. While he acknowledges that a turnaround is possible, Yeung acknowledges the many obstacles that Musk is facing. As he notes:
“Musk’s strategy still comes with big risks. Studies by U.S. research firm Strategic Vision found that 39% of car buyers now say they wouldn’t consider a Tesla. That’s a product of Musk’s divisive approach. Recently, researchers at MIT also concluded that Twitter may have lost more than 1 million users since Elon Musk took over. The social media platform has since released opposing figures.”
The Uncertain Road Ahead
As Yeung highlights, the future of Twitter remains uncertain but it is already pushing TSLA stock down. And for the investors watching closely, it’s hard not to be concerned. The fact that Tesla shares hit a two-year low last week doesn’t help inspire confidence in Musk or his company. Experts knew that shares would fall after Musk sold off some TSLA stock holdings to help finance the Twitter acquisition. But since then, the stock hasn’t rebounded and has been steadily trending downward.
Musk doesn’t seem too concerned, even as TSLA stock continues to fall. While his nature is highly unpredictable, it is clear that unless he takes action soon, TSLA stock will keep falling.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any 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.
