Tesla Stocks Drop Following Elon Musk’s Drive to Take Over Twitter
- By FXT
- May 20, 2022
- FXT Analysis
Tesla stocks have fallen further amidst a barrage of bad news for the storied electric carmaker, including its removal from a key index of environmentally friendly companies, target price downgrades from leading investment banks, and ongoing controversy in relation to the Twitter takeover bid by CEO Elon Musk.
Prices for Tesla shares have plunged by over 40% since the start of 2022, include a fall of 8.28% in just the past week of trading.
Tesla shares have fallen around 20% since CEO Elon Musk unveiled controversial plans to acquire social media giant Twitter, with the goal of converting it into a private company.
Controversy continues to swirl around the USD$44 billion acquisition bid, for which Musk originally planned to put up 60 million Tesla shares as collateral in order to secure margin loan funds.
News emerged this week that the deal could be scuppered completely, after Musk stated that it will not go ahead unless Twitter can provide proof that less than 5% of accounts on the platform are fake or spam accounts.
The news added further to a week of poor press for the storied electric automaker.
Tesla was ousted from the S&P 500 ESG Index on Wednesday, on the grounds that its business practices no longer score high enough compared to its peers to warrant inclusion.
Margaret Dorn, S&P’s head of ESG indices for North America, said that Tesla was now ineligible for inclusion after an annual rebalancing of the index drove its ranking to the bottom 25% of the automobile and components group.
In a blog post made to the official S&P website on Wednesday, Dorn said that the automobiles and components group had seen a rise in their average ESG score, while Tesla’s rating had remained stable.
Dorn also pointed to concerns over Tesla’s lack of a low-carbon strategy and codes of business conduct, as well as issues in relation to working conditions and the handling of product-related injuries and fatalities.
The removal of Tesla from the ESG Index could be interpreted as a sizeable setback for the reputation of any EV maker, given that a key target market consists of environmentally aware consumers seeking to reduce their carbon footprint.
Musk responded dismissively to the move, stating via Twitter that “ESG is a scam,” while also asserting that it has been “weaponised by phoney social justice warriors.”
Tesla was also hit this week by the release of two reports from leading investment banks that downgraded their price targets for the company.
Investment bank Piper Sandler cut its price target for Tesla to $1,035 per share on Thursday, due to concerns that COVID-19 restrictions in China will thwart the company’s production target of 1.5 million vehicles for 2022.
French banker Exane BNP Paribas is even more pessimistic about Tesla’s prospects, slashing its price target to $600, as well as maintaining its underperform rating.
Paribas said that Tesla is no longer the stand-out product that it once was, following the rapid emergence of credible competitors in the EV space produced by leading rival automakers.
According to Paribas EV’s produced by Volkswagen now more or less match Tesla in terms of quality, while Lucid Group surpasses it in terms of technology.
Tesla is also facing rivals that have emerged in its key manufacturing hub and sales market of China, including Shanghai-headquartered NIO, which has earned plaudits from analysts for its sophisticated battery-swapping system.
Further compounding Tesla’s woes this week has been the shutting down of reservations for the Tesla Cybertruck in the Australian market.
While the product is still available in the US, Canada and Mexico, Australian consumers are now greeted with a “Get Updates” option on the ordering page.
The closure of online reservations for the Cybertruck has created uncertainty as to whether the futuristic electric ute will be available for sale in Australia.