Following his Twitter poll and his declaration that he wanted to challenge the rules of institutional economics, Elon Musk has had to come to terms with reality. It was the investors themselves who caused Tesla’s shares to change course.
Elon Musk causes Tesla’s shares to plummet
After the announcement of the imminent sale of a significant percentage of shares, investors did the same, creating a sudden and strong change in price.
The sale of so many shares set the price bar very low and Musk’s image did not benefit. Wall Street is not forgiving and very quickly Musk himself had to reckon with his personal wealth. Fifty billion dollars were lost along the way.
The same thing happened to Jeff Bezos, who was hit by the negative news of his divorce from his wife MacKenzie Scott. This, however, does not give rise to any concerns about the global economic status of Elon Musk, who is still (according to Bloomberg) the richest man in the world, some 100 billion dollars behind Bezos himself.
The Tesla issue also has a lot to do with the direct taxation of a value held on the stock exchange. The higher the volume, the less tax is paid.
Being subject to a sudden drop in taxation leads to an exponential increase in the percentage to be paid. But the cycle seems to be closing, because this was Musk’s initial move.
It was US President Joe Biden’s proposal that drew attention to the possibility of taxing those shares and securities held in Wall Street portfolios, especially those of the 700 richest men in America.
It was this presidential proposal that triggered the survey, later published by Musk himself on Twitter. Bezos, Zuckerberg and Musk are all examples of how the management of their shares on the stock exchange is determined by volatility. However, it is the brands they work with and on which they have built their empires that account for almost 90% of their wealth.
Amazon for Bezos, Tesla for Musk and Facebook (now Meta) for the young Zuckerberg. By simply asking users on Twitter what they thought of the government’s financial movements and plans, Tesla’s stock lost about 16%. $200 billion was lost.
And on Monday, the stock lost another 1.94%, trailing last Friday’s terrible performance of the Nasdaq 100.
Stock movements are often dictated by the announcement of partnerships between global giants. However, Elon Musk is now trying to keep a cool head, especially in relation to the two agreements with PepsiCo and Hertz Global Holdings. The order for a large number of electric trucks produced by Tesla was the first step towards a historic partnership.
However, the agreements with both companies have slipped from year to year and now production is only expected to ramp up in 2023.
If there is an agenda behind the wealthy South African entrepreneur’s use of social media, it has not taken into account the concerns of many international businesses. Already in 2018, Musk himself had to report to the SEC (Securities and Exchange Commission) on a series of social behaviours that were not part of the pre-signing agreement with the American regulator.
JP Morgan itself sued Tesla for failing to comply with the agreements and terms of the contract regarding the re-pricing of certain financial instruments listed on the stock exchange. JP Morgan Chase & Co. is seeking $163 million in damages.
In case Musk had sensed actions against him by institutional bodies or global competitors, his move to make users around the world participate through personal statements on Twitter may not have been the right choice.