As Tesla Analyst Laments $600B Market Erosion, Elon Musk Schools Him On Basics Of 'Securities Analysis'

Zinger Key Points
  • Tesla bulls vented their frustration at the stock’s precipitous drop this year and blamed Twitter as the main reason.
  • Elon Musk, however, thinks the Federal Reserve's rate hikes are to blamed for the predicament.

The Tesla Inc. TSLA stock sell-off has worried most stakeholders. Over the weekend, Ross Gerber took to Twitter to express his anguish at the value erosion in the stock.

What Happened: Despite the $600 billion erosion in Tesla stock’s market capitalization, there has been no response from the company’s board, said Gerber, the co-founder of the Gerber Kawasaki Wealth and Investment Management.

More importantly, the fund manager blamed the predicament squarely on Tesla and also said the inaction from the board is “wholly unacceptable.”

Gerber’s AdvisorShares Geber Kawasaki ETF GK has Tesla as its top holding with a 7.2% weighting. The fund held 7,192 shares at the end of Friday’s session.

See Also: How to invest in Tesla (TSLA) Stock

Musk was quick to respond and gave his take on the reason for the stock plunge. While stating that Tesla is executing better than ever, Musk said he has no control over the Federal Reserve, apparently suggesting that the Fed’s rate hikes have been the real problem.

A day later, Musk had more explanation to offer Gerber. Captioning his reply as “Securities Analysis 101,” Musk said, “As the risk-free” real rate from Treasury Bills approaches the much riskier rate of return from stocks, the value of stocks drop."

Not stopping there, he went on to give an example. If T-bills and stocks both had a 10% return, the preference will naturally be for the former, he said.

Fundamentals Have A Part, Black Says: Future Fund’s Gary Black said Musk’s Twitter focus wasn’t the sole reason for Tesla’s underperformance. Weak volumes in China — a function of COVID-19 — macroeconomic conditions and a lack of $30,000 electric vehicle to compete with BYD Manufacturing Company Limited BYDDY BYDDF also served as a pushback, Black added.

The Twitter conversation then morphed into a discussion among Tesla analysts.

Gerber chimed in and said Tesla has had record earnings and deliveries, new factories and the new Semi truck launch. He then questioned what else was ailing Tesla other than the Twitter situation.

When Fintwit meme analyst Parik Patel replied that Gerber should consider buying more Tesla stock if he thinks the pullback is not a fundamental drawdown. Gerber said he would add more as soon as Musk returns to Tesla or someone else is put in charge.

Incidentally, Musk ran a poll on Twitter asking users if he should give up his role as CEO. At the end of the poll, 57.5% voted in favor of Musk stepping down and 42.5% voted he should stay on.

Price Action: In premarket trading on Monday, Tesla shares were rising 4.48%, to $156.96, according to Benzinga Pro data.

Read Next: Cathie Wood Resumes Tesla Buying Amid Stock's 16% Weekly Declines: Here's How Much Ark Invest Added In The Past Week

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