Skip to Content

Why Tesla investors may need to worry about Elon Musk’s Twitter distraction


CNN

By Paul R. La Monica, CNN Business

Tesla is in a highly competitive electric car market. It has no chief operating officer. And CEO Elon Musk was already busy juggling leadership roles at SpaceX, The Boring Company and Neuralink before he launched an unsolicited takeover offer for Twitter. That’s a lot of distractions. And it may be one too many for Tesla investors.

Tesla’s stock fell nearly 4% Thursday after Musk disclosed that he had made a more than $41 billion bid to buy Twitter. Shares of Tesla did rise a bit Monday but they are still down 6% so far in 2022.

The good news (if you want to call it that) for Tesla shareholders is that the stock is not off nearly as much as traditional automotive rivals GM, Ford and Chrysler owner Stellantis. Shares of Detroit’s Big Three have each plunged more than 20% this year.

Tesla was not immediately available for comment about whether Musk’s pursuit of Twitter could take away from his focus on Tesla. But the company, to its credit, has managed to thrive in spite of the often circus-like atmosphere surrounding Musk.

To that end, Tesla is expected to report an earnings-per-share increase of nearly 145% from a year ago when it releases first quarter results on Wednesday. Analysts are forecasting a more than 70% jump in sales thanks to strong global demand for the company’s Model S, X, 3 and Y vehicles.

Competition’s heating up

Still, all of the major US auto companies are gunning for Tesla, as are leading European and Asian car companies.

“Elon Musk’s offer to buy Twitter is the latest development in a weeks-long saga that is simply a distraction from the many challenges facing Tesla itself,” said David Trainer, CEO of New Constructs, an investment research firm, in an email.

“Elon Musk should focus on Tesla and not waste time attempting to acquire and manage [Twitter],” Trainer added.”Tesla is facing significant competition in the electric vehicle space. The major automakers are catching up and are manufacturing innovative electric vehicles.”

There’s also the growing threat from newer EV rivals like Rivian and Lucid in the United States as well as Nio, Xpeng and Li Auto in China.

With competition around the globe increasing, one would think that Musk would want to prioritize Tesla instead of tilting at the social media windmill that is Twitter.

Musk’s perhaps quixotic attempt to take over Twitter and mold it into what he claims would be a platform that better supports free speech could also make some prominent companies reluctant to spend money on a Musk-led Twitter.

“As Musk has displayed his thirst to change Twitter mainly with regard to content moderation, some large brands may become hesitant to place ads next to what they consider may be more questionable content,” said Morningstar’s Ali Mogharabi in a report.

Why would that matter to Tesla? It seems reasonable to wonder whether a backlash against Musk over his Twitter behavior could make more affluent, liberal car buyers think twice about buying a Tesla in the future.

But perhaps the biggest risk for Tesla as a result of any further Twitter dalliances is that the company can ill-afford any more issues that keep Musk from focusing on Tesla.

Unlike SpaceX, which has long-time president and COO Gwynne Shotwell to manage the day to day business, Tesla has long lacked a clear-cut No. 2 exec.

Several top managers have left Tesla in recent years, including last year’s departure of key automotive executive Jerome Guillen. Tesla’s management bench is now embarrassingly thin.

The only other two top executives listed on the company’s investor relations site are senior vice president Andrew “Drew” Baglino, who oversees engineering, and the so-called “Master of Coin” (aka chief financial officer) Zachary Kirkhorn.

So if Musk is serious about adding Twitter to his massive financial empire, it might be a good idea for Tesla to make it clear to Wall Street just who would be calling the shots there.

There are only so many hours in the day, which means that if Musk feels the need to pay more attention to fixing the little blue bird, he’d be thinking less about how to make cool new cars and trucks.

The-CNN-Wire
™ & © 2022 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Article Topic Follows: CNN - Business/Consumer

Jump to comments ↓

Author Profile Photo

CNN

BE PART OF THE CONVERSATION

KVIA ABC 7 is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content