Tesla shares plummeted by nearly seven per cent in premarket trading on Monday, as CEO Elon Musk's plans to launch a new American political party reignited concerns about his commitment to the company.
The electric vehicle manufacturer is already struggling with declining sales, adding to investor apprehension.
Mr Musk unveiled the 'America Party' on Saturday, a development that follows his public spat with president Donald Trump over a tax-cut and spending bill.
Their feud escalated into an all-out social media brawl in early June, with Mr Trump threatening to cut off billions of dollars in federal subsidies received by Mr Musk's companies.
Musk's political move comes days after Tesla posted a second straight drop in quarterly deliveries, piling pressure on its stock as the company grapples with fierce competition and an aging vehicle line-up.
"Investors are worried about two things – one is more Trump ire affecting subsidies and the other, more importantly, is a distracted Musk," said Neil Wilson, UK investor strategist at Saxo Markets.
Tesla's stock, which hit a record high in December after Trump's November re-election, has lost 35 per cent since then, making it the worst-performing stock among "the Magnificent Seven" group of high-growth U.S. companies this year.
Investors had in May cheered Musk's decision to scale back his political involvement and remain Tesla CEO for another five years. He had spent nearly $300 million around Trump's re-election campaign last year.
"But now (they) are worried he's going to (get) sucked back in and take his eye off Tesla," Wilson said.
Wedbush analyst Dan Ives, a Tesla bull, said many investors are feeling a "sense of exhaustion" over Musk's insistence on immersing himself in politics.
The first signs of investor unease surfaced soon after Musk's announcement, with investment firm Azoria Partners delaying the listing of a Tesla exchange-traded fund.
Trump on Sunday called Musk's plans to form the "America Party" "ridiculous", saying the Musk ally he once named to lead NASA would have presented a conflict of interest given Musk's business interests in space.
Tesla board moves
Azoria Partners CEO James Fishback posted several critical comments on X about Musk's new party, and called for the Tesla board to clarify Musk's political ambitions and evaluate if his political involvement is compatible with his obligations to Tesla as CEO.
The new party undermines the confidence shareholders had that Musk would be focusing more on the company, Fishback said.
Musk's latest political move raises questions around Tesla board's course of action. Its chair, Robyn Denholm, in May denied a Wall Street Journal report that said board members were looking to replace the CEO.
Tesla's board, which has been criticized for failing to provide oversight of its combative, headline-making CEO, faces a dilemma managing him as he oversees five other companies and his personal political ambitions.
"This is exactly the kind of thing a board of directors would curtail - removing the CEO if he refused to curtail these kinds of activities," said Ann Lipton, a professor at the University of Colorado Law School and an expert in business law.
"The Tesla board has been fairly supine; they have not, at least not in any demonstrable way, taken any action to force Musk to limit his outside ventures, and it's difficult to imagine they would begin now."
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