Tesla Shares Plunge 6.8% Following Musk's Announcement of New Political Party

According to foreign media reports, Tesla's stock price plummeted 6.8% on July 7 in the New York market, resulting in a market capitalization loss of over $68 billion. This drop is the largest single-day decline since early June when Musk publicly split from Trump over the presidential tax bill. According to Bloomberg's Billionaires Index, Musk's personal wealth also saw a decline of $15.3 billion in a single day. Musk previously announced plans to form a 'Party of America' to compete with both the Republican and Democratic parties, focusing on securing seats in both chambers of Congress over the next year. Musk stated on the X platform that supporting a presidential candidate 'is not out of the question' thereafter. Following the announcement of Musk's new political party, concerns arose regarding his ability to focus on Tesla's future, leading to the significant drop in stock price. Data analytics company Ortex indicated that investors shorting the electric vehicle manufacturer could potentially profit approximately $1.4 billion based on a stock price of $296. Just prior, on June 5, a public feud between Trump and Musk escalated on social media, resulting in Tesla's market value experiencing its largest single-day decline, with profits for short-sellers exceeding $4 billion on that day. This year, Tesla's stock has fallen 27% due to Musk's political activities tarnishing the brand's image among consumers. Jed Dorsheimer, a stock analyst at William Blair, noted in a report on July 7 that investors are growing weary of Musk's political distractions at a time when Tesla needs his focus on business. He downgraded Tesla's rating to 'Hold.' Dan Ives, an analyst at Wedbush Securities, expressed disappointment in Musk's actions, stating, 'Tesla's board must intervene; Musk is starting to cross boundaries.' James Fishback, CEO of investment firm Azoria, wrote to Tesla's board, claiming that Musk has undermined investor confidence in the company's future. Fishback stated, 'Musk has placed his personal political ambitions above his obligations, which harms Tesla shareholders.' Neither Musk nor Tesla board chair Robyn Denholm responded to requests for comment on the matter. Currently, Musk has not provided many details about his political party, nor is there any indication that he has submitted formal documents to the Federal Election Commission. During the last election cycle, he became the largest political donor, investing heavily in Trump's presidential campaign, complicating his ability to manage multiple companies ranging from AI to Mars exploration. Diverting resources and energy to a new political party contradicts Musk's earlier promises to investors during Tesla's Q1 earnings call, where he stated he would devote 'more' time to company operations after ending his work in the Trump administration in May. In May, Musk told Bloomberg that he committed to leading Tesla for the next five years and planned to reduce his political activities in Washington. He remarked, 'I plan to significantly reduce my political spending going forward. I feel I have done enough in that regard.' In the same interview, Musk claimed that Tesla's sales 'have improved' and that his political activities have opened pathways to attract right-wing consumers to compensate for losses among left-leaning consumers. However, the recent second-quarter global sales data released by Tesla did not support Musk's claims, as the company reported a 13% decline in deliveries, nearly matching the year-on-year decrease in Q1.