• Tesla with weak stock market development in 2022
• External factors and Musk’s Twitter purchase under review
• Berkshire overtakes Tesla in the S&P 500
The value of Tesla shares has almost halved over the year to date. The former stock exchange high-flyer suffers from various price-damaging factors.
Weakness in growth stocks
One reason for the poor stock market performance is a fundamental weakness of tech stocks, which are losing ground to value-oriented industrial stocks. The US Federal Reserve is partly to blame for this, with its more restrictive monetary policy responding to high inflation. Higher interest rates make Tesla stock unattractive. There are also problems in China, one of the most important markets for the electric car manufacturer: The country follows a strict non-COVID policy and repeatedly imposes lockdowns in the event of corona outbreaks.
In addition, Tesla — albeit in some cases less than its peers — is suffering from material sourcing issues and ongoing supply chain disruptions. Rising prices are an additional burden for the electric car manufacturer. In addition, there is a risk of a drop in demand in connection with inflation and a possible recession that could be triggered by monetary policy.
Twitter deal puts additional pressure on Tesla
In addition to the external factors that Tesla, like other sector representatives, has to cope with, there is also a home-made problem: Because the Tesla boss Elon Musk has already dumped a large amount of Tesla shares several times this year. After selling shares in April and August, the richest man in the world sold Tesla shares again this week: Musk has raised around $4 billion in sales in three different trading sessions in the past few days, according to Tesla documents the US Securities and Exchange Commission published.
While the reason for Musk’s stock sales hasn’t been made public, it seems clear that the money is intended to fund Twitter’s recent $44 billion acquisition. Musk financed the purchase partly with his own funds but also with loans of around 13 billion US dollars. According to media reports, servicing the loans alone costs around one billion US dollars a year.
Since the turbulent takeover, the new owner, who took Twitter directly from the stock exchange, has been trying to make the company profitable – and has introduced a subscription model, among other things. However, the plans are apparently not yet fully mature, as shown by the recent back and forth about the so-called blue tick on Twitter, which account owners can use to verify themselves.
“Please note that Twitter will be doing a lot of stupid things in the coming months,” Musk said on Twitter. “We’ll keep what works”.
Please note that Twitter will do lots of dumb things in coming months.
We will keep what works & change what doesn’t.
– Elon Musk (@elonmusk) November 9, 2022
In addition to the fact that Elon Musk is selling Tesla shares to refinance the acquisition of Twitter, this is a particular concern for Tesla shareholders. Because the CEO of the automaker seems to spend a lot of time on Twitter – time and attention that he is depriving Tesla of at the same time.
Berkshire overtakes Tesla
A look at the share price development also makes this clear, because Tesla shares have made a large part of their losses in the past three months – in the midst of the takeover quarrels.
Musk’s renewed share sale even deprived Tesla of its rating position in the renowned S&P 500 index, where Tesla slipped from 5th to 6th place among the most valuable companies. With a market capitalization of around 560.79 billion US dollars, the electric car manufacturer is now worth less on the stock exchange than the traditional company Berkshire Hathaway led by star investor Warren Buffett, which with a market value of 636 billion dollars is now ahead of the Musk group in the S&P 500 .
It is not only the Tesla weakness that has led to a swapping of the index positions, but also a strength of the value stock Berkshire Hathaway, which has shown itself to be quite robust over the course of the year with a loss of 3.46 percent. “This is a great example of how ‘slow and steady’ is winning the race in the current environment,” Bloomberg quoted Arthur Hogan, chief market strategist at B. Riley Wealth. “Value has lagged growth stocks for the better part of a decade, but the tide has certainly turned this year and that will likely continue into next year.”
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