By Tesla, the electric vehicle giant, experienced a drop in stock value on Monday. Meanwhile, its competitors, Ford Motor, General Motors, and Rivian Automotive, saw an increase in their shares. This peculiar occurrence has left many wondering about the possible culprit behind Tesla’s underperformance.
The stock of Tesla, listed as TSLA, fell by 1.8%, while both the S&P 500 and Nasdaq Composite registered a 0.2% rise. On average, the three other major players in the automotive industry witnessed a growth of around 1.3% in their respective share values.
Although it’s important to note that this is just a one-day fluctuation and may not hold much significance, there seems to be one factor that could potentially explain Tesla’s downturn—an eerie sense of déjà vu for the company’s investors.
Twitter, of all things, might be the reason behind this recent underperformance. More specifically, it is Meta Platforms’ Twitter competitor, Threads, that is being held accountable.
Interestingly enough, the CEO of Cloudflare, a cybersecurity company whose CEO is Matthew Prince, tweeted on Sunday about the decline in Twitter’s traffic. According to him, Twitter’s domain ranking has fallen by approximately nine spots since the start of this year. Keep in mind that Google currently holds the top position as the most visited domain on the World Wide Web. Meanwhile, Twitter has plummeted to number 37 in the ranking, down from its starting point of around 32 at the beginning of the year—a significant drop.
Undoubtedly, Threads is one of the leading factors contributing to this decline in traffic for Twitter. Despite being launched only a few days ago, Meta’s microblogging app has already amassed an impressive base of over 100 million users.
While it’s too early to draw concrete conclusions from a single day’s market performance, it is evident that Tesla investors are closely monitoring the potential impact of Threads and Twitter’s declining popularity on the company’s future prospects.
The Financial Impact of Elon Musk’s Stock Sales on Tesla
It’s only natural to question why the recent stock sales by Tesla CEO Elon Musk matter for the company. The answer lies in how these sales affect Twitter’s finances. In order to purchase Twitter and support its operations in 2022, Musk sold a significant amount of his Tesla stock.
No investor likes to see the CEO of a company they hold selling off large blocks of stock. Even if they have faith in Musk’s dedication to Tesla, buying shares ahead of such a substantial stock sale is not ideal. As a result, these sales put a strain on investor sentiment regarding Tesla for several months.
However, this overhang began to dissipate in late December when Musk announced that there would be no further stock sales for the next 18 to 24 months. While Tesla stock is always subject to fluctuations, it found stability shortly after Musk’s announcement in early January, with shares bottoming out at around $102 each. In fact, this past week, Tesla stock traded above $284.
Investors want to focus on important factors such as electric vehicle (EV) deliveries and profit margins rather than worrying about Twitter’s performance in comparison to Threads. So, what should Tesla investors do in response to all of this? The answer may very well be nothing. Rather, they should simply keep an eye on how Threads affects Twitter’s financial performance in a substantial way.
When it comes to potential Tesla stock sales, neither Tesla, Twitter, nor Musk have responded to requests for comment. It’s highly unlikely that investors will receive an advance notice if Musk needs to sell more Tesla stock. Instead, they will have to react to such a sale as it happens.
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