Tesla Inc. (NASDAQ:TSLA) stock plummeted nearly 7% in Monday pre-market trading in response to CEO Elon Musk’s re-entry into the political landscape amid his ongoing dispute with President Donald Trump over the contentious “Big, Beautiful Bill.”
What Happened: The decline follows Musk’s announcement of the formation of a new political party, in response to the Senate’s approval of the “Big, Beautiful Bill.” This bill has eliminated the $7500 EV credit and rendered the Zero Emission Vehicle (ZEV) credits, a significant revenue source for Tesla, effectively obsolete.
Over the weekend, Musk announced that the party would be named the "America Party" and might concentrate on "just 2 or 3 Senate seats and 8 to 10 House districts." He argued that this would be sufficient to hold the deciding vote on divisive legislation, helping ensure such laws reflect the true will of the people.
However, Elon Musk denied filing for the registration of the political party the Federal Election Commission.
Trump criticized Musk’s move as “a train wreck” on Truth Social, questioning the necessity for a third political party in the U.S.
Why It Matters: This development comes on the heels of Musk’s decision to establish a political party, which has raised concerns among investors. Former DOGE advisor and Tesla investor, James Fishback, expressed that this move undermines investor confidence in the EV giant. His investment company Azoria Partners also postponed the launch of Tesla Convexity ETF on this note.
Musk stepped away from DOGE in May, a move that benefited Tesla's stock. However, his renewed involvement in politics is now unsettling investors.
The formation of the "America Party" by Musk has elicited mixed reactions among investors, analysts, and loyalists. While some see it as a step in the wrong direction, others believe it’s too early to predict the impact on Tesla’s brand in the short term.
"Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story," stated Dan Ives, the lead technology analyst at Wedbush.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
