Tesla investors are asking CEO Elon Musk and the Tesla board to consider buying its own shares as the company’s stock price plunges to a two-year low. Tesla stock traded at $183.20 on Wednesday, and its market capitalization has plunged nearly $700 billion from its peak a year ago.
Musk said on Tesla’s third-quarter earnings call that the company is likely to make a “significant buyback” next year, perhaps between $5 billion and $10 billion. Last week, him She said it would be up to “Tesla’s board of directors” to decide.
Repurchasing shares from the market would reduce the number of outstanding shares available, which increases the share of ownership by current shareholders. This is because reducing the supply of shares often causes prices to rise. Bull Tesla and influencer Alexandra Merz recently launched a Change.org petition to advocate for a quick buyback later this year. Merz said this would allow Tesla to “benefit from a currently heavily devalued share price” and avoid the 1% apology tax that any buybacks over $1 million will be subject to by Jan. 1, 2023.
Merz and other investors also argued that a share buyback would show confidence in Tesla’s future performance and return wealth to shareholders.
“I am a huge fan of Tesla and have been a stockholder, but to preserve my capital I was forced to turn to the dark side,” commented one signatory, of whom there are currently 5,807. “I recently started shorting the stock and have recouped about half of my losses. I believe in Tesla’s long-term growth, but need to see some action from the board before I go long again. A good buyback it would show confidence from the board that Tesla is still a good investment.”
Tesla’s stock has taken a hit lately for a variety of reasons, including diminishing investor confidence in Musk to run the company effectively. Many have complained that Musk is, at best, distracted by his recent purchase and acquisition of Twitter, a social media platform on which the executive has recently aired his policies even more than usual. Musk and some Tesla board members are currently in court over the CEO’s $56 billion salary package after a Tesla shareholder accused Musk of being a “part-time CEO.”
The declines in Tesla stock also followed massive stock sales by Musk, who needed cash to fund the $44 billion Twitter deal.
Some analysts, such as Morgan Stanley’s Adam Jones, worry that the Twitter fiasco and Musk’s rampant tweet could hurt consumer demand for Tesla, as well as trade deals and government relations.
Musk’s involvement in Twitter isn’t the only reason for the shares plummeting. While Tesla still remains the EV market leader in the United States, the company is rapidly losing market share to other automakers as new models come online. In the third quarter, Tesla had a 64% market share in electric vehicles, down from 66% in the second quarter and 75% in the first quarter. Ford, GM, and Hyundai brands are quickly catching up as they scale production of popular EV models like the Mustang Mach-E, Chevy Bolt, and Ioniq 5.
Tesla is also losing ground to Chinese EV makers like BYD and Wuling Motors in China, where the automaker recently slashed prices to attract buyers, receiving lackluster enthusiasm. Additionally, Beijing is now in lockdown and further restrictions have been imposed in China as coronavirus cases rise. Not only could this affect Tesla’s ability to operate its gigafactory in Shanghai, but further restrictions will further affect China’s weakened economy and reduce demand for luxury products like Tesla.
Then there are the back-to-back recalls Tesla issued over the weekend: more than 350,000 vehicles from US customers with software glitches that disable taillights or deploy airbags during minor collisions in some cars. This is on top of 17 other recalls this year.
Finally, Tesla has gotten a lot of bad press this year for its advanced driver assistance systems Autopilot and “fully autonomous driving” or FSD, which have been linked to some fatal accidents at worst and simply not at best. they worked as expected. In September, Drivers filed a lawsuit against the company for falsely advertising the autonomous capabilities of its technology.
All of the above, coupled with a bear market, caused Tesla’s market cap to jump from $1.2 trillion last November to $574 billion as of Wednesday’s close.
Billionaire Leo Koguan, who claims to be Tesla’s third-largest individual shareholder, has been advocating a buyback for months. Last week he tweeted that Musk should stop selling shares and use the “right time” to buy back shares “before Q4.” Musk responded to the tweet by saying he depended “on the Tesla board of directors”.
In October, Koguan called Tesla to repurchase at least $5 billion of stock, and has in the past backed up to $15 billion in buybacksstating that Tesla should use its free cash flow to finance the buyback.
As of the third quarter, Tesla has free cash flow of $3.3 billion.
Koguan he said Tesla can still invest in FSD, its Optimus bot and the new gigafactories, while also buying back “undervalued stocks”.