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Tesla shares fall in premarket trading as Elon Musk's 'America Party' sparks investor worries

Tesla shares fall in premarket trading as Elon Musk's 'America Party' sparks investor worries

Time of India3 days ago
Tesla
shares
fell nearly 7% in premarket trading on Monday after CEO
Elon Musk
's plans to launch a new U.S. political party raised investor doubts about his focus on the electric automaker's future.
The former head of the Department of Government Efficiency (DOGE) unveiled the 'America Party' on Saturday, voicing his displeasure over President Donald Trump's 'One Big, Beautiful Bill'.
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This further escalates Musk's feud with Trump even as Tesla posted a second straight drop in quarterly deliveries. Their discord over the tax bill erupted into an all-out social media brawl in early June, with Trump threatening to cut Musk's government contracts and subsidies.
"Investors are worried about two things - one is more Trump ire affecting subsidies and the other, more importantly, is a distracted Musk," said Neil Wilson, UK investor strategist at Saxo Markets.
Investors had in May cheered Musk's decision to scale back political spending and remain Tesla CEO for another five years. He had spent nearly $300 million around Trump's re-election campaign last year.
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"But now (they) are worried he's going to (get) sucked back in and take his eye off Tesla," Wilson said.
The first signs of investor unease surfaced soon after Musk's announcement, with investment firm Azoria Partners delaying the listing of a Tesla exchange-traded fund.
Trump on Sunday called Musk's plans to form the "America Party" "ridiculous", saying the Musk ally he once named to lead
NASA
would have presented a conflict of interest given Musk's
business
interests in space.
TESLA BOARD MOVES
Wedbush analyst Dan Ives, a Tesla bull, said many investors are feeling a "sense of exhaustion" over Musk's insistence on immersing himself in politics.
Azoria Partners CEO James Fishback posted several critical comments on X about Musk's new party, and called for the Tesla board to clarify Musk's political ambitions and evaluate if his political
involvement
is compatible with his obligations to Tesla as CEO.
The new party undermines the confidence shareholders had that Musk would be focusing more on the company, Fishback said.
Musk's latest political move raises questions around Tesla board's course of action. Its Chair Robyn Denholm in May denied a Wall Street Journal report that said board members were looking to replace the CEO.
Tesla's board, which has been criticized for failing to provide oversight of its combative, headline-making CEO, faces a dilemma managing him as he oversees five other companies and his personal political ambitions.
"This is exactly the kind of thing a board of directors would curtail - removing the CEO if he refused to curtail these kinds of activities," said Ann Lipton, a professor at the University of Colorado Law School and an expert in business law.
"The Tesla board has been fairly supine; they have not, at least not in any demonstrable way, taken any action to force Musk to limit his outside ventures, and it's difficult to imagine they would begin now."
Tensions with Trump, struggling sales and an aging vehicle line-up have hurt Tesla's stock, even as the company bets on growth from autonomous vehicles.
The stock, which soared to over $488 in December after Trump's November re-election, has lost 35% since then and closed last week at $315.35.
Tesla is the worst performing stock among "the Magnificent Seven" group of high-growth U.S. companies this year.
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