Tesla stock has been in free fall, falling 15% in one day on March 10, its worst drop since 2020. The company’s stock has fallen 55% from its December high. Consequently, Elon Musk’s net worth fell by $29 billion overnight, taking his overall fortune to $301 billion. But why is that? Let’s break it down.
Investor Fears Over Musk’s Government Role
Elon Musk has taken on a new, controversial role in the US government. He is now director of the Department of Government Efficiency (DOGE), an agency that is aimed at cutting back federal spending. The majority of Tesla investors fear that this new role is diverting their attention away from his position at Tesla. They think his attention is split, making Tesla susceptible.
Musk has reassured investors that Tesla will remain a priority. However, his venture into government has created doubt regarding whether he is fully committed to Tesla’s future. That is a risk some investors are not willing to take, and so they are leaving Tesla stock.
Targeted Attacks on Tesla Facilities
Tesla has also been facing security threats. Some of its facilities have been targeted in instances of shooting and vandalism. The authorities believe that these instances could be linked to Musk’s political involvement. Some investors are worried that Tesla’s growing political alignments could make it a target.
Bad news has the ability to shake investor confidence. Security issues add to the uncertainty, leading some investors to decide to sell their shares of Tesla.
Broader Market Conditions
The American market has been tottering. It just lost over $1.7 trillion of value. Tesla is not singled out in doing so, but because it has high volatility, it has a greater likelihood of being hit by a declining market.
The investors are also worried about inflation and rates. The Federal Reserve policies are capping the growth of technology firms. Being a high-growth firm, Tesla is affected more by this than traditional businesses.
SpaceX Growth Balances Out Musk’s Losses
Despite Tesla’s downfall, Elon Musk remains the world’s richest man. His wealth is not just based on Tesla. SpaceX, his space exploration venture, continues to grow in value.
His other business ventures, including The Boring Company and X (formerly Twitter), also contribute to his wealth. Even though he lost $29 billion in a single day, his total wealth remains vast.
What’s Next for Tesla?
Musk responded to the stock drop with a blunt statement: “It will be fine long-term.” This suggests that he believes in Tesla’s future.
Tesla has always bounced back from stock drops. The company is still leading the electric vehicle market. If investors are comforted by Musk and Tesla keeps innovating, the stock could bounce back.
Investors are still apprehensive for the moment. They are holding their breath to know what Musk will do next. If concerns about his government role and security issues at Tesla persist, the stock may continue to flounder. But if Tesla reports good numbers, everything can turn around.
