How Has Elon Musk Reacted To Tesla's 70% Stock Plunge This Year?

Tesla Inc. TSLA shares have been through a bloodbath this year, part of the damage is self-inflicted, while the remaining is due to extraneous factors.

What Happened: Tesla stock's freefall started conversations with both the EV maker's backers and detractors joining in the chatter. But the man behind the venture — Elon Musk — was conspicuous by his absence in the discussions, save stray comments, which invariably did not cut ice with even his staunchest supporters.

See Also: How Did Elon Musk Make His Money

When so much of his fortunes are tied to the stock, it is strange that he has remained tightlipped through its plunge. Following his recent offloading of Tesla stock, Musk still holds about 423.6 million or about 13.4% stake in the electric vehicle company, Future Fund’s Gary Black said recently.

Even at the depressed value of $109.10, Musk’s stake is worth about $46.2 billion, roughly 36% of this net worth of $130 billion as estimated by the Bloomberg Billionaires Index.

Musk thrives and grows in the spotlight. He often wears his heart on his sleeves, which has landed him in trouble in the past. Who can forget the infamous “funding secured” tweet from 2018 that brought him in the crosshairs of regulators and the legal system?

Given Tesla disbanded its PR department in 2020, Musk has been serving as the company's mouthpiece, occasionally at events, earnings call and shareholder meetings but mostly through Twitter and his public appearances.

So, why is he staying under the radar this time around? Has he ever explained away Tesla’s recent woes?

The Ebb & Flow: Tesla shares had a solid run in 2020 even amid the peak of the first COVID-19 wave. From $27.89 at the end of 2019, the stock ran up 743% before ending 2020 at $235.22, as the company grew deliveries to a little under 500,000 units for the year and cemented its leadership position in the electric vehicle race.

A 5:1 stock split implemented in the middle of the year also supported sentiment. The company capped off the year with its first annual profits. Detractors would like to point out that the irrational exuberance of the retail crowd took valuations to unsustainable levels.

The rally continued into 2021, although the magnitude of the upside tempered to nearly 50%. Economic conditions were beginning to turn unfavorable toward the end of the year and competitive pressure intensified as both upstarts and legacy automakers plunged headlong into the EV arena. On top of these, supply chain challenges began to pressure production in late 2021.

All hell broke loose at the start of 2022. After maintaining the fed fund rate at extremely accommodative levels for about two years in the aftermath of the pandemic, the Fed began to contemplate interest rate hikes to rein in inflationary pressure. The central bank walked the talk by beginning monetary policy normalization in March 2022. By that time, an unexpected risk emerged in the form of the Russia-Ukraine war, which exacerbated supply chain constraints and increased input pricing pressure.

Meanwhile, China, a key market for Tesla from the perspective of production and margins, reported on-off COVID-19 waves. The EV giant had to shut down its Giga Shanghai factory for about a month between March and April, and then again briefly in July for factory upgradation.

The mother of all problems came in the form of Musk’s interest in the social media platform Twitter. After months-long uncertainty, the billionaire finally took possession of Twitter in October. The Twitter buy hurt Tesla in three ways. Musk sold some of his Tesla stock to fund the acquisition, which weighed down on the stock. More than the liquidations, the market was more nervous over whether he will need to sell more of the stock.

Following the purchase, Twitter became Musk’s obsession, consuming all of his time and attention. Reports, meanwhile, suggested Tesla’s brand image took a hit from Musk’s missteps at Twitter and his political comments on Twitter.

Silence Is Golden? As the Tesla sell-off went from bad to worse, Musk rarely offered any reassuring commentary or comments

Come December, there were stray comments from him, mostly blaming the economy for the predicament. In early December, he elaborated on the macro challenges — “energy in Europe, real estate in China & crazy Fed rates in USA.” In another instance, Musk lamented about having no control over the “macroeconomic tides,” and also reassured that Tesla is great in the long term.

The stock barely budged with these explanations. Tesla bulls countered Musk’s assertion and highlighted a few fundamental and self-inflicted risks.

Later, on a Twitter Space call, Musk had the most elaborate discussion about Tesla in a while. While assuring that he will no longer sell Tesla stock in the next 18-24 months, Musk said he has never missed any company meeting thus far and that Tesla has an amazing product roadmap. He repeated his intent to step down as Twitter CEO once a replacement is found, signaling that his undivided attention would shift back to Tesla.

With Tuesday’s 11%+ plunge, Tesla’s stock has dropped below a key support level of around $110. Uncertainty around China production could cloud the stock until more clarity emerges on the front. Tesla bulls have been calling for a stock buyback as the stock trades at an extremely attractive valuation. The forward P/E is now at a very attractive 24.21.

Will Musk take a proactive approach in turning things around for the stock or will he be a mute spectator watching the EV maker fall from grace? Only time will tell. At least one thing is certain for now. Tesla investors have a long, nervous wait ahead before things begin to look up.

Price Action: Tesla stock closed Friday's session down 11.41%, at $109.10, according to Benzinga Pro data. The shares have lost 69.03% for the year-to-date period.

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