Nasdaq is down -121.55, -1.09% to finish at 11,024.51 volume at 3,893,774,855. Tesla has a Beta value of 1.96. The expected movement for Tesla would be 1.96 * -1.09% = -2.14%. Since Tesla went down 6.84% much higher than what the beta would suggest, there may be additional reasons other than macro economic or general trend. Here are some reasons that may have caused it to go down more than the market.
Reason one is Tesla CEO Elon Must has been actively reorganizing Twitter. He initially announced a layoff of 50% of Twitter staff. Twitter started with about 7000 employees. The initial layoff trimmed employee count to 3500. Then of the employees that remained he asked them to choose between 3 month severance or to commit to long hours to build Twitter 2.0. An article from the New York Times estimates an additional 1,200 employees resigned last Thursday. This would mean Twitter now has about 2300 employees. This is a drastic change and some Tesla investors may be concern Elon Musk is diverting too much attention to Twitter. Twitter needs Elon Musk at this critical moment to set a new course and he can’t hand over its operations to another executive. Also over the weekend, Twitter reenabled former president Donal Trump’s account after Elon Musk posted a Twitter poll with 51% voting to reactive that account. This controversial move concerns advertisers because of Donald Trump’s behavior at a critical time during the January 6 Capitol Riot. These advertisers may be hesistant to advertise on Twitter. Without a strong revenue stream for Twitter, Elon Musk may need to sell additional Tesla shares to give Twitter a longer run way. Whenever Elon Musk sells shares the additional selling volume drives Tesla shares down.
Reason two is China, the largest automotive market may be experiencing economic slow down following Tesla Q3 2022 earnings conference call. During the call, Elon Musk said China is in “Recession of Sorts” related to real estate. According to Reuters, Tesla has lowered the price of Tesla Model 3 by about 9%. One reason may be there is softer demand. Another reason may be lower cost from higher Shanghai Gigafactory efficiency and reduced cost of raw materials. The lower cost enables Tesla to pass on the savings to customers. If demand is softening, that will negatively impact revenue and profit margins.
There can be other unknown reasons.
Can these issues be fixed?
The upcoming Q4 2022 report will clarify the demand question on China. The long term demand for EV remains strong. The migration to EVs is similar to the adoption of smart phones. Consumers are not going back to the tiny screens of old cell phones without access internet and app stores. Similarly consumers will not go back to ICE cars. Elon Musk will continue to spend time at Twitter. When Twitter is stabilized there will be less negative sentiment from Twitter. Tesla has experienced leaders and can execute on the plan for the short term with less input from Elon during this time when he is more focused on Twitter. SpaceX, another Elon Musk company for example ran fine during 2018 when Elon Musk was famously sleeping on the Fremont factory floor to fix issues with the production ramp of the Model 3.