Since reaching its high point a year ago, the market capitalization of Tesla has dropped by close to $700 billion, which is more than the individual market value of all but a small number of public corporations in the United States.
The market capitalization of Tesla increased from less than $100 billion to more than $1.2 trillion as a result of the meteoric rise in the value of the company’s shares, which went from a split-adjusted $30 at the beginning of 2020 to the north of $400 last November. However, since then, it has plunged by about 60% to reach $530 billion as of the close of trading on Monday.
The reduction in market value that Tesla experienced $670 billion is not far off from the total worth of Warren Buffett’s Berkshire Hathaway, which is $685 billion. It easily surpasses the market caps of Johnson & Johnson (460 billion), Exxon Mobil (four hundred and fifty-seven billion), and JPMorgan (three hundred and ninety billion).
In addition, the market capitalization of Musk’s electric vehicle company has dropped by an amount equivalent to more than double the market cap of Home Depot ($324 billion), or the combined market caps of Coca-Cola ($268 billion) and PepsiCo ($255 billion).
Even more startling is the fact that the decline in Tesla’s market valuation is almost similar to the decline of three McDonald’s ($201 billion), Disney ($178 billion), and Wells Fargo ($178 billion) Additionally, this amount is equivalent to approximately four Nikes ($162 billion), five Netflixes ($127 billion), six Starbucks ($113 billion), seven PayPals ($92 billion), and twelve GMs or Fords ($56 billion each).
Only Apple, Alphabet, Amazon, Microsoft, and Berkshire Hathaway are worth more than the $670 billion that Tesla has lost in market value over the past year. This is one of the companies that make up the S&P 500. The precipitous drop is a reflection of a larger exodus from growth companies, as well as concerns that Musk’s redesign of Twitter will be an expensive distraction for the company.
In the face of soaring inflation, climbing interest rates, and the impending onset of a recession, investors have been selling skyrocketing equities like Tesla.
However, when prices are climbing, savings accounts and bonds are offering larger and risk-free returns, and an economic downturn threatens to hammer corporate earnings and stock-market valuations, those dollars become less attractive as an investment. Musk’s automaker promises to earn the majority of its profits in the future.
In addition, Elon Musk recently purchased Twitter for $44 billion and is currently in the process of reworking its services, restructuring its economic model, and firing thousands of staff. Already, he has monetized the enterprise by selling Tesla stock worth multiple billions of dollars in order to finance it.
As a consequence of this, Tesla owners are concerned that they would either lose focus on the company or sell additional shares, either of which might bring the stock price of the manufacturer down.
Opinions on how to interpret Tesla’s dramatic reduction in valuation are currently split. Bears such as Michael Burry, who appeared in “The Big Short,” have cautioned that the stock could fall much further, and bulls such as Ron Baron anticipate that the price will reach new highs within the next few years.
