Elon Musk’s finance lesson for Tesla investors

Posted on January 02, 2023 by Peter McGuthrie

Tesla CEO Elon Musk has been making several headlines in recent months, as his $44 billion purchase of Twitter continues to garner attention from investors. And while many have been critical of Musk’s focus on Twitter and recent sales of Tesla shares, the tech titan has pointed to a different catalyst.

Above: Elon Musk. (Image: Tesla Owners Club Belgium / Wikimedia Commons)

Musk shared a finance lesson for investors in a recent tweet responding to a critic saying the CEO had “erased $600 bil of Tesla wealth,” as detailed in a report from Barron’s. Musk emphasized how interest rates affect stock value in the series of tweets, adding that Tesla is currently performing at its peak abilities — despite some other external factors.

“Securities Analysis 101,” wrote Musk in a tweet responding to Kawasaki Wealth CEO and Tesla investor Ross Gerber. “As the ‘risk-free’ real rate of return from Treasury Bills approaches the much riskier rate of return from stocks, the value of stocks drop. For example, if T-bills and stocks both had a 10 percent rate of return, everyone would just buy the former.”

Despite Musk’s explanation, Gerber and Future Fund Active ETF’s Gary Black opposed his position, noting other potential factors such as his recent share sales, public perceptions of Tesla’s brand amidst the Twitter saga, and even correcting him on on the fact that risk-free rates start on treasury bonds, rather than treasury bills.

Musk has an undergraduate degree in Economics, and his track record running companies such as Tesla, SpaceX, Neuralink and X.com (which would become PayPal) show that he at least knows a thing or two about finance. Still, the news is the latest in a series of critiques regarding Musk’s move to buy Twitter, which many Tesla shareholders have called into question as requiring too much of the CEO’s time.

Tesla is down more than 33 percent since Musk took over Twitter. That said, the CEO is quick to note recent developments with the Federal Reserve raising interest rates as the core reason — rather than his move to take over the social media company, or sales of Tesla shares.

“Tesla is executing better than ever,” wrote Musk earlier in the thread.

In recent weeks, Musk explained that he doesn’t plan to sell any shares for at least another 18-24 months, or at least for 2023. This should suffice for some investors, with Gerber even noting that he’d pick up more Tesla shares at the current low share price — under one specific condition.

“I’m happy to buy more tesla at this price but I won’t do it if you’re selling at this price…”

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Source: Barron’s

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