[Business & Issues] The Man in Crisis Who Made 'Tesla' Cry, Musk

⑫From 'Icon of Innovation' to 'Owner Risk'
Various Scandals Including Drug Use Follow
Profitability Declines Even for Hardly Acquired X

[Image source=Reuters Yonhap News]

Can Elon Musk, CEO, wipe away the tears of the 'Teslam' (people who follow Tesla)?

The image of Elon Musk, CEO, who has been called the 'icon of innovation' and led stock price rallies, has ironically turned into a symbol of 'owner risk,' causing Tesla's stock price to struggle to find signs of recovery. The stock price, which was once forecasted to exceed $300 per share at the beginning of the year, has remained around the $170 level amid a continuous decline. Various scandals surrounding Musk, including drug use and his relationship with former President Trump, have emerged, and his control over Tesla is also shaken due to a reduction in his Tesla holdings. The poor profitability of X (formerly Twitter), which was acquired with massive resources, is also a negative factor.

Tesla, which was $248 per share at the beginning of the year, fails to reach even $200

According to Bloomberg News on the 28th (local time), Tesla's stock price recorded $175.79, down 29.2% from $248.42 at the beginning of the year. Although it rebounded after hitting $162.50 on the 14th, investor disappointment remains significant. There were even forecasts of a rebound above $300 last month, but since falling below $200 this month, the stock price has struggled to recover to the early-year level.

On the surface, Tesla's stock price decline is attributed to fierce competition from Chinese electric vehicle companies. On the 26th, Chinese electric vehicle company BYD announced that its net profit last year was 30 billion yuan (about 5.5767 trillion won), nearly double the 16.6 billion yuan from the previous year. BYD ranked first in global electric vehicle sales in the fourth quarter last year, surpassing Tesla. BYD's sales volume was 525,409 units, more than 40,000 units higher than Tesla's 484,507 units.

Concerns are growing that Tesla's future position and growth in the electric vehicle market will be significantly weakened due to the low-price offensive of Chinese electric vehicles. Data analytics firm FactSet Research Systems (FDS) stated that Tesla's electric vehicle delivery performance in the first quarter of this year, as expected by Wall Street in the U.S., will be 481,000 units, a decrease from the fourth quarter.

Investment banks' sentiment toward Tesla is also weakening. Earlier this month, Goldman Sachs lowered Tesla's target price from $220 to $190, and UBS from $225 to $165. Mizuho changed Tesla's investment rating from buy to neutral, and Wells Fargo lowered its rating to underweight.

Due to Tesla's stock price decline, Musk lost his position as the 'world's richest person.' According to the Bloomberg Billionaires Index, the world's richest person is Bernard Arnault, chairman of LVMH Group, followed by Jeff Bezos, chairman of Amazon. Musk, who held the top spot until last year, dropped to third place. Musk's net worth is about $192 billion (approximately 258 trillion won) as of the 28th, with $37.2 billion (about 50 trillion won) wiped out over the past year due to Tesla's stock price decline.

Various scandals including drugs and relationship with Trump... Owner risk highlighted

[Image source=AFP Yonhap News]

The most negative factor for Tesla's stock price in the market is owner risk. Various scandals surrounding Musk are significantly shaking Tesla's credibility and stock price stability.

At a sensitive time ahead of the U.S. presidential election in November, rumors of a close relationship between Musk and former President Donald Trump have sparked political controversy. On the 3rd of this month, Musk met individually with Trump at the Mar-a-Lago resort in Florida. In U.S. political circles, criticism poured in that Musk met to officially support Trump. Musk stated on his social media platform X (formerly Twitter) that "I will not donate to either of the two presidential candidates," but rumors of a close relationship with Trump have not subsided.

Musk's private life has also emerged as a significant owner risk. On the 18th, during an appearance on CNN anchor Don Lemon's 'Don Lemon Show,' Musk revealed that he regularly takes small amounts of drugs prescribed by a doctor, saying, "Taking ketamine helps when feeling negative." The ketamine he mentioned is originally a general anesthetic developed in the 1960s and is also used as a treatment for depression. However, if abused, it causes strong hallucinations and is classified as a controlled substance.

In July last year, a scandal arose over an alleged affair between Musk and Nicole Shanahan, wife of Google co-founder Sergey Brin. Musk and Shanahan strongly denied the allegations, but after Brin and Shanahan divorced, Musk's romantic controversies became a topic among shareholders.

Profitability of X, acquired with difficulty, worsens... Users down 23% since acquisition

[Image source=AFP Yonhap News]

The poor business performance of X, which Musk acquired with difficulty by selling some Tesla shares, is also a negative factor. According to Sensor Tower, a global app market analysis firm, the average daily active users of X's mobile app in the U.S. last month was 27 million, a sharp 18% decrease in one year. Compared to November 2022, right after Musk acquired X, the number dropped by 23%.

During the same period, competing social networks Snapchat increased by 8.8%, Instagram by 5.3%, Facebook by 1.5%, and TikTok by 0.5%. Youssef Abed, senior insights analyst at Sensor Tower, pointed out, "Although other competing social networks also faced poor operating environments, none experienced as large a user decline as X. This may be due to disappointment with explicit content, general platform technology issues, and increased threats from short-video platforms."

Previously, Musk relaxed X's content regulations that limited white supremacist images and hate speech. Subsequently, Musk posted content on his X account supporting anti-Semitism, leading to a significant decrease in corporate advertising. Among 100 U.S. companies that advertised on Twitter, 75 stopped advertising.

As losses from X, which Musk acquired by selling some of his Tesla shares, increase, concerns are rising that Tesla could also be adversely affected. Last year, he sold Tesla shares worth $40 billion (about 53.7 trillion won) to cover the acquisition cost of X. His Tesla holdings have decreased from 17% to 13.4%. Bloomberg News pointed out, "The possibility that Musk may sell additional Tesla shares continues to pressure Tesla's stock price."