Tesla Stock Drops 7.3% Amid Musk's Political Party Announcement

On Monday, Tesla's stock price fell by 7.3% in pre-market trading. This decline came after Elon Musk announced his plan to form a new political party in the United States, escalating his feud with Donald Trump. This development has raised concerns among investors about the potential impact on the company's focus and leadership, thereby putting pressure on the stock price.

Dan Ives, a senior technology analyst at a securities firm, noted that Musk is Tesla's "biggest asset," and his decision to delve deeper into politics could exert pressure on the company's stock. Ives stated in a Sunday report, "Tesla needs Musk as the CEO and its biggest asset, not someone who is again on the political path... and also alienating Trump."

Ives further suggested that given the political nature of this move, it would not be surprising if the Tesla board intervened if Musk pushed this initiative too far.

Trump, on Sunday, dismissed Musk's plan to form the "American Party" as "ridiculous" and launched a new attack on the tech billionaire. Trump mentioned that he had considered nominating one of Musk's allies to lead the National Aeronautics and Space Administration (NASA), but this appointment would have created a conflict of interest due to Musk's commercial interests in the space sector.

Musk's sudden announcement to form the "American Party" has not only deepened his rift with Trump but has also sparked criticism from both political and business circles. The day after Musk announced his plan to form a new party to counter Trump's tax and spending bill, the Treasury Secretary advised the tech giant to focus on running his business rather than getting involved in politics.

The Treasury Secretary stated, "I guess no company board would be happy with (Saturday's) statement, and they would urge him to focus on business rather than political activities." This exchange began when Musk criticized Trump's recently signed tax cuts and defense spending bill, claiming it threatened national financial stability.

The billionaire, who served as a key advisor to Trump during his second term, now plans to challenge Republican lawmakers who support the bill in the midterm elections next year.

Meanwhile, an investment company announced the delay in launching a Tesla-themed exchange-traded fund, citing concerns over Musk's political ambitions. The CEO of the company, who is a public supporter of Trump, criticized Musk's actions on social media and called on the Tesla board to clarify whether Musk could balance his political pursuits with his role as CEO.

Musk, who had generously contributed to Trump's 2024 campaign, has seen his relationship with Trump deteriorate due to the spending bill. Multiple reports suggest that Trump has hinted at potentially canceling federal government contracts and subsidies with Musk's companies, citing the new law's elimination of green energy subsidies for electric vehicles, which angered the billionaire.

The Treasury Secretary also downplayed Musk's political influence, noting that voters prefer Musk's government efficiency initiatives over the man himself. "The principles of DOGE are very popular," he said, "but if you look at the polls, you'll find that Musk is not popular."