Tesla Shares Face 10% Drop as Musk's Political Activities Rattle Investors

Tesla's shares are anticipated to experience a significant decline in Monday's trading session, as concerns mount that the White House may view Tesla's CEO, Elon Musk, as an adversary rather than an ally. This sentiment was expressed by Wedbush tech analyst Dan Ives, who warned that Musk's recent political activities could force Tesla's board to intervene. On July 4, Musk announced the formation of a third party aimed at influencing the outcomes of a dozen closely contested races, a move that has raised eyebrows among Tesla investors.

Musk's pledge to dedicate himself fully to his shareholders, even going so far as to sleep on factory floors and in server rooms, lasted only six weeks before he was drawn back into the political arena. This return to political activism has left many Tesla investors feeling exhausted, as they had hoped that Musk's tumultuous spell in the White House was behind him. Ives warned that Musk's deepening involvement in politics is precisely the opposite of what Tesla investors want, especially during this critical period for the company.

Tesla's stock has had a tumultuous year, with significant fluctuations driven by Musk's political activities. In late May, as Musk's time in the administration was winding down, he vowed to return full-time to running his companies. This was welcome news for Tesla investors, as the company still needs to deliver on its new low-cost model and scale up its autonomous ride-hailing service. However, Musk's alliance with Trump fractured over the latter's Big, Beautiful Bill, which raised the U.S. federal debt limit by $5 trillion. Musk now plans to finance races in a dozen or so hotly contested House and Senate seats, which could serve as the deciding vote on contentious laws.

Ives, a prominent bull on the stock, had initially argued that the chance of further escalation in conflict between Musk and Trump was low, given their mutual dependence. However, he now acknowledges that the feud between the world's wealthiest man and arguably its most powerful one has only just begun. Musk is known for his competitive nature and has often stated that he will finish fights that he does not start. Ives suggested that it would not be surprising if Tesla's board intervenes at some point to exert pressure on their CEO.

Tesla's board has remained largely silent throughout Musk's period of political activity, neither during the initial round of protests and boycotts nor during the feud with the president. However, Musk's recent political activities risk dragging Tesla into the political wilderness by alienating lawmakers on both sides of the aisle. In a post symbolic of fears that the company was now directly linked to his America Party, Musk was forced to correct the record that Tesla's finance chief Vaibhav Taneja was not serving as Treasurer after a convincing fake had been uploaded to the Federal Election Commission’s website domain. Musk stated that the filing was false and had been reported as such to the FEC.