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Is Twitter Really The Reason Tesla Is Down 65%?
Sometimes you just have to laugh…
There are fanatics of many CEOs and companies.
But none like those of Elon Musk and Tesla.
What’s funny is how Tesla bulls are crying about the declining share price because Elon is spending his time trying to turn around Twitter.
Voters call for Elon Musk to step down as head of Twitter, 57.5%-42.5%…would be a big relief for Tesla investors…
— Dan Ives (@DivesTech)
11:25 AM • Dec 19, 2022
I think it is in the best interest for tesla shareholders for Elon to be back at Tesla working full time. I hope that he finds a ceo for Twitter in q1 and he makes the transition out of being Twitter ceo. If elected to the BOD I will work to create a clear timeline. $TSLA
— Ross Gerber (@GerberKawasaki)
7:08 PM • Dec 17, 2022
Dan and Ross are two of the biggest Tesla bulls out there. They’ve been going on national television for years talking about Tesla’s “fundamental” bull case.
They’ve looked smart. Tesla was up 6x over the past 5 years.
Meanwhile, Elon has been the CEO of several businesses: Tesla, SpaceX, The Boring Company, etc…
There were no issues as Tesla’s share price went up.
No one complained about Elon’s time then. Running three separate billion-dollar companies isn’t an issue when everyone is making money.
Until today.
Tesla’s share price is down 65% over the past 12 months.
Now Tesla fanatics are coming out in full force and crying foul because Elon is spending too much time running Twitter.
Tesla bulls always knew this was a risk. Or at least they should have. We called it out in our June 3rd, 2021 missive The Best Way To Know A Company (emphasis added):
“There's a simple way to understand a business. I mean, really know a business. Not just what the company does.
The way to do that is to know what keeps the C-Suite up at night. What its competition is doing. And really... what could pummel its share price. Or worse, go out of business.
If you want to invest in a company long term. You must know what could go wrong. And assign a probability to that possibility.
The best way to do that is in the company's quarterly or annual filings (the 10Q or 10K). This is where the company must disclose any and all potential risk factors that could crush its share price.
So starting with this section is usually what we do here at Mighty when analyzing individual companies.
Read the Risk Factors section and you'll be ahead of 99% of investors.
You see, we all have a tendency to just focus on the positive. But we spend much less time thinking about what could go wrong. If any time at all.
For example, when most people tell you, "Invest in Tesla. They're the future." Ask them what "What if Elon does something crazy and gets booted Adam Neumann - WeWork style?"
Guaranteed you'd get caught with blank stares. Or the basic "That can't happen" response. The funny thing is... this is a risk factor in Tesla's filings. Don't believe me? Check it out.
Might be a silly example. But the probability is greater than zero. Enough to put it in their SEC filing.
Maybe Elon calls it quits on Tesla and focuses full time on SpaceX? Who knows. But I'm assuming most Tesla fans don't spend a second thinking about any of these scenarios.
Yet Tesla is telling you to consider it a legitimate risk.”
Tesla is going down for many reasons.
Among them are the free-money era being over, the Federal Reserve being hellbent on destroying wealth, recession fears, and a falling knife.)
But to cry foul over something Elon has been doing for years shows they’re trying to scapegoat anyone but themselves – for potentially not taking profits nor sizing positions accordingly is ridiculous.
The point isn’t to beat on Tesla fanatics.
It’s to make sure your thesis in whatever stocks you have isn’t solely based on any one thing… like Elon being the face of the company.
Remember, the market doesn’t know nor care that you own a stock. Which makes position sizing so important.
Be sure you know yourself. Know what you own. And the risks associated with those holdings. If you don’t… the market will make sure you find out the hard way.
Good investing,
Lance