Monday, 6 February 2023

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An NYU economics professor says that Elon Musk has an ‘amazingly fraught relationship with Wall Street’ and warns that Tesla faces several risks

An NYU economics professor says that Elon Musk has an 'amazingly fraught relationship with Wall Street' and warns that Tesla faces several risks

After a brutal year for investors in 2022, Tesla stock has soared more than 30% this month alone—and that’s in spite of major price cuts to the company’s vehicles in the U.S. and Europe. 

Retail investors have piled into Elon Musk’s EV giant over the past six months, spending more on Tesla shares than they did in the previous five years combined, the Wall Street Journal reported Monday, citing data from Vanda Research. But Joseph Foudy, an economics professor at New York University’s Stern School of Business, is warning that Tesla faces “both short term and long term risks” that could ruin the party.

“Short term, Twitter has just been an amazing distraction,” Foudy told Bloomberg on Monday, referencing Tesla CEO Elon Musk’s $44 billion acquisition of the social media company. “Everyone’s just assuming he’s full time on Twitter and Tesla and SpaceX are a distant second and third.”

Foudy isn’t alone in saying that Musk needs to refocus on Tesla. Wedbush’s tech analyst Dan Ives explained in a Tuesday research note that Musk has “essentially gone from a superhero with a red cape to a villain in the eyes of many investors” because his “Twitter fiasco” is hurting Tesla’s stock price. And Foudy said that Musk’s latest trial is another long-term risk for Tesla because it could affect Wall Street’s trust in the company. Musk is appearing in court this week over claims he misled investors in 2018 when he tweeted that he had the funding secured to take Tesla private at $420 per share.

“He [Musk] just has an amazingly fraught relationship with Wall Street,” Foudy said. “It just means that every statement from Tesla moving forward is going to be incredibly parsed. And it just reminds analysts and investors of every past case where they missed earnings, made promises on products that never came to fruition—every past statement that wasn’t born out.”

Foudy also believes that Musk’s recent politically charged comments—including his claim that he will vote Republican, complaints about his $11 billion tax bill, and his hard-line anti-censorship stance—could be reducing the size of his customer base in key markets in the U.S. and Europe.

“Tesla customers lean affluent, well-educated, they tend to live in blue states, and the whole fight over censorship seems perfectly tuned to antagonize them,” he said, arguing Musk’s comment represent a long-term risk for investors.


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