Tesla shares tumble as Elon Musk floats new US political party

By Admin

11 Jul, 2025

Introduction:
In a dramatic twist that has rattled Wall Street and Tesla shareholders alike, CEO Elon Musk has announced plans to launch a new US political party. The news comes amid a very public falling-out with former ally and current US President Donald Trump, igniting investor fears and prompting a sharp drop in Tesla’s market value.

Stock Crash Amid Political Uncertainty:
Tesla shares plummeted by 7% as of 12pm in New York on Monday, following Musk’s Friday announcement of his political ambitions. This development coincides with the release of Tesla’s second-quarter report, which showed a notable decrease in vehicle sales, a downturn analysts partially attribute to Musk’s increasing political involvement.

The Trump-Musk Rift:
The clash between Musk and Trump reached a new peak last week when Trump signed a tax bill that Musk publicly opposed. Trump, in turn, dismissed Musk's political party idea as “ridiculous.” The feud escalated on social media in early June and has since sparked a wider debate about the implications for Musk’s various business ventures.

Investor Reaction and Market Impact:
Investor confidence has been severely shaken. Musk's political focus has raised alarms among stakeholders who feel that the CEO is neglecting his primary responsibility leading Tesla during a pivotal time in the electric vehicle market.

Dan Ives of Wedbush Securities summed up the sentiment in a research note:
“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.”

Camelthorn Investments adviser Shawn Campbell echoed this concern, stating:
“I, and every other Tesla investor, would prefer to be out of the business of politics. The sooner this distraction can be removed and Tesla gets back to actual business, the better.”

If the current share price trend continues, Tesla stands to lose over $80 billion in market valuation. Meanwhile, short sellers are set to gain approximately $1.4 billion in paper profits.

Governance Crisis at Tesla:
The turmoil has also brought renewed scrutiny to Tesla’s board of directors. Despite the fallout, Chair Robyn Denholm recently denied a Wall Street Journal report suggesting the board had considered replacing Musk. Critics argue that the board has failed to rein in Musk's erratic behavior and is too passive in providing the necessary oversight.

“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 business law professor at the University of Colorado Law School.

Conclusion:
Elon Musk’s growing political ambitions have reignited long-standing concerns about governance, focus, and stability at Tesla. With sales down, political distractions mounting, and investor patience thinning, the automaker faces a critical period ahead. Whether the Tesla board steps in or remains passive may determine not only the future of its leadership but the company’s long-term survival in an increasingly competitive EV landscape.