Elon Musk’s two prominent companies, Tesla and Twitter, are sharply in focus for investors right now. Twitter isn’t publicly traded, but that doesn’t mean it has no impact on the stock market–Musk’s role as CEO of the social media company is causing issues for his publicly-traded business, Tesla. Recently, he’s floated the idea that he might step down from Twitter after a handful of embarrassing events.
Musk is reportedly looking into tapping a successor to take over the company, which he has described as being on the “fast track to bankruptcy” since May of this year. This gloomy outlook has colored most of Musk’s statements regarding Twitter, with a tweet on Sunday reading, “[t]he question is not finding a CEO, the question is finding a CEO who can keep Twitter alive.”
Meanwhile, the broader stock market looks shaky Tuesday morning. Investors are deeply concerned about the potential of a recession in the early weeks of 2023–though some analysts have pointed out that investors have been jittery about a recession for nearly a year now with little to show for such bearish outlooks. Earlier in the day, the Bank of Japan made a hawkish pivot to adjust the cap on its 10-year bond yield, which sent some shockwaves through the US market’s outlook.
Tesla Shares Sink on Musk Antics
Sometimes, it feels like Tesla’s biggest enemy is its own CEO, Elon Musk. Musk’s well-documented online antics have cost him dearly in the past, such as when he paid a fine to the SEC for a tweet suggesting he’d “secured funding” for taking Tesla private when no such measure had taken place. Now, the electric automotive manufacturer is facing stock issues again relating to Musk’s use of Twitter–though, this time, it’s about his $44 billion purchase of the company in October.
“While we continue to view Tesla as having a leading EV gross margin advantage from global scale, vertical integration, and US IRA [Inflation Reduction Act] benefits, it is impossible to ignore that investors are already well aware of these benefits but now must ALSO battle test demand assumptions for 2023-2025,” writes Evercore ISI analyst Chris McNally in a recent note.
McNally slashed his price target for Tesla shares from $300 down to just $200. He joins analysts at Wedbush and Goldman Sachs in this bearish outlook, which is largely derived from Musk’s massive leverage in Tesla stock. That same stock is being used to prop up his loans used to buy Twitter, and the social media platform doesn’t seem to have turned profitable yet for the beleaguered businessman.
Musk Searches for Twitter CEO
Some sources have indicated that Musk is on the hunt for a replacement CEO for Twitter. Musk himself openly denies this, saying, “there is no successor,” but reports still suggest that this isn’t the case. While he said in November that he planned to only serve as Twitter’s CEO for a limited time, it remains to be seen whether he meant a few years or only a few months.
“Musk has sold billions of dollars worth of Tesla shares this year to finance the Twitter takeover,” writes CNBC contributor Ashley Capoot. “He has also pulled in talent from Tesla, SpaceX, and the Boring Co., including executives, engineers, and attorneys, to assist him at Twitter.”
These strange moves have apparently proven unpopular among Tesla’s shareholders. Many of the company’s investors have called on Musk to step back from his role at Twitter to help shore up his profitable company–especially ahead of what some analysts presume will be a tough financial year in 2023.
Stock Markets Choppy Tuesday
The three major indexes continued their choppy pattern Tuesday morning, extending uncertainty from Monday deeper into the week. The three indexes notched disappointing closes yesterday, sinking to their lowest levels in weeks, as investors look for any glimmer of good news on the horizon. For now, it looks like there’s no such relief coming.
The S&P 500 sank around 0.2% after the start of trading. The Dow Jones Industrial Average moved sideways this morning, notching little to no change before noon. The tech-focused Nasdaq Composite saw the biggest movement, as usual, posting a 0.4% drop that should come as no surprise to market watchers. With the mood on Wall Street staying uncertain, it’s hard to say whether this pattern could break into a holiday rally later this week or if it’ll be a blue Christmas for investors.
“With inflation expected to remain higher than the past decade and money supply still near a record high, there is still too much liquidity that needs to be drained,” insists Megan Horneman, the Chief Investment Officer of Verdence Capital Management. “This means that the days of the Fed coming in and cutting rates to zero at any sign of economic weakness are behind us.