Tesla stock started Friday higher after Elon Musk said he’s be assuming a reduced role at Twitter after naming a new CEO. Shares finished lower, however, as investors extrapolated a bit too much from the recent news.
Here’s what we know. Linda Yaccarino will become the new Twitter CEO, according to Musk. She “will focus primarily on business operations, while I focus on product design and new technology,” Musk tweeted out on Friday.
Investors initially cheered the news. Tesla (ticker: TSLA) stock closed up $3.54, or $2.1%, at $172.08. on Thursday. And shares rose to start the day Friday.
That move made sense. Tesla investors have been all but begging Musk to reduce his role at Twitter. They have been worried about management distraction ever since Musk got involved with the social media company. A new CEO might also indicate the social media platform is performing better, which reduces the likelihood Musk will be selling more Tesla stock to fund losses.
But the early gains evaporated and then some. Tesla stock closed down $4.10, or 2.4%, at $167.98 Friday, while the
S&P 500
and
Nasdaq Composite
were off about 0.2% and 0.4%, respectively.
Why the about-face? Some investors seem to be looking for hidden messages in Musk’s tweets about the appointment of Yaccarino, making connections to the timing of Tesla’s annual shareholder meeting, and other news items. The biggest concern appears to be that Musk could step down as Tesla’s CEO, perhaps to focus on product development.
The game of connect-the-dots began when The Wall Street Journal suggested in a Thursday story CFO Zachary Kirkhorn could be a successor to Musk. It was published before the Twitter CEO news broke, and comes days before Tesla’s 2023 annual shareholder meeting on May 20. The proximity to the Twitter announcement served to fuel speculation that Musk would step down at Tesla too.
The rumblings were serious enough that investors and analysts felt the need to weigh in. “Total nonsense to speculate that [Musk] might give up his role as CEO at Tesla in addition to Twitter,” tweeted Gary Black,
Future Fund Active ETF
(FFND) co-founder, on Friday morning, linking to a news story about the potential switch.
He elaborated on those thoughts to Barron’s. “First, Zach isn’t the natural successor. Tom Zhu is,” Black said. Zhu ran Tesla’s business in China and is now the senior vice president of the automotive business. “Second, Elon is giving up the Twitter CEO role. Why would he give up Tesla CEO role as well?”
Wedbush analyst Dan Ives also was skeptical. “Better chance of me playing in NBA Playoffs than Musk stepping down at Tesla,” Ives said. He rates Tesla shares Buy and has a $215 price target for the stock.
Those two don’t believe Musk is stepping down from Tesla. It can be difficult to disprove the colloquial negative, though. No one knows exactly what Musk will do. What is most likely is that he will stay CEO of his car company.
Friday, Musk responded to a tweet about the Twitter change signaling his commitment to Tesla with a simple “Yup.”
Maybe that will be enough to curb the speculation. Or maybe not.
Write to Al Root at allen.root@dowjones.com
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