Elon Musk's advocacy of unfettered speech on Twitter and his dismantling of content moderation on the social media site has caused a growing number of consumers to turn sour on Musk's Tesla brand. This has taken a bite out of Tesla stock, analysts say.
Tesla stock is down 15% since Musk, the electric-car maker's chief executive, completed his acquisition of Twitter on Oct. 28.
Controversial moves include Musk reinstating numerous right-wing agitators that were previously banned from Twitter. These include former President Donald Trump. There also has been a sharp rise in racist and antisemitic comments on Twitter, further tarnishing the Tesla stock story, according to various reports.
Morgan Stanley analyst Adam Jonas weighed in on the matter this week. He said Musk's spiteful comments have inflated a negative sentiment about Tesla and could drive some degree of damage to the electric-vehicle maker's fundamentals.
"Our investor survey reinforces our views that Elon Musk's recent involvement with Twitter has contributed to negative sentiment momentum in Tesla shares and could drive some degree of adverse downside skew to Tesla fundamentals," Jonas said in a note to clients.
Twitter's Massive Drop In Revenue
It was already bad enough for Musk that about half of Twitter's largest advertisers have bailed to avoid having ads next to controversial material. Early this month Musk sent out a tweet saying that Twitter has experienced "a massive drop in revenue."
Apple, a significant example, has "mostly stopped" advertising on Twitter, according to Musk. He then issued a string of negative comments, attacking Apple and Chief Executive Tim Cook.
Wedbush analyst Dan Ives, in a report to clients last week, said the "Twitter circus show" is an overhang on Tesla stock that is not abating.
The Twitter overhang is comprised of three main factors, Ives wrote. One is the fear of Musk selling more Tesla stock to fund Twitter's red ink. There's also brand deterioration of Tesla, and Musk's attention focused on Twitter instead of Tesla.
"In what has been a dark comedy show with Twitter, Musk has essentially tarnished the Tesla story/stock and is starting to potentially impact the Tesla brand with this ongoing Twitter train-wreck disaster," Ives said.
Advertisers have stopped placing ads on Twitter ever since Musk completed his $44 billion acquisition of the company, taking on $13 billion in debt to complete the deal.
Tesla Stock: Most Overpaid Acquisition
Ives said the $44 billion price tag for Twitter "will go down as one of the most overpaid tech acquisitions in the history of M&A deals on the Street."
In the first week of the deal closing, Musk slashed the Twitter workforce in half. That included teams responsible for content moderation. Following that was the exodus of several high-level executives.
Among other actions taken by Musk that have raised concerns among advertisers is his reinstatement of Trump. In addition, Twitter will no longer enforce its policy against coronavirus misinformation, the Washington Post reported.
Tesla stock is down 46% since Musk first revealed a 9% stake in Twitter in early April.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
