What happened
In Wednesday-morning trading, stock markets are mixed -- the Nasdaq down a fraction of a percent, the S&P 500 up a different fraction of a percent on moderately good inflation data -- a pleasant respite from the three-day streak of nonstop selling that began late last week. There's unfortunately no respite for Tesla (TSLA 1.85%) investors, however.
As of 10:10 a.m. ET, Tesla stock is down 2%.
Image source: Getty Images.
So what
The most likely culprit for Tesla's declining share price is none other than CEO Elon Musk himself, who took the stage at the Financial Times Future of the Car 2022 yesterday to speak on a variety of subjects -- any one of which could be the one that upset investors today.
What did Musk have to say? Here's a quick roundup:
- Tesla's sales are growing in size, and the company's cars are even more popular than Ford's historic Model T was back in its day, boasted the Tesla CEO.
- Musk said he plans to remain head of Tesla for "as long as [he] can be useful."
- It's also "not out of the question" that Tesla will buy a mining company in order to ensure it has access to such metals as nickel and lithium, crucial to the manufacture of rechargeable batteries for electric cars.
If you ask me, though, it's that last item that has the greatest potential to upset Elon's electric apple cart.
Now what
Consider: Right now, Musk and Tesla are doing fine business building and selling electric cars and largely leaving the problems of acquiring raw materials to build the batteries for them to its battery suppliers, such as Panasonic. Tesla's sales are soaring -- sales were up 80% last quarter, and profits were up more than 650%. Tesla has, in fact, put together a string of 11 straight profitable quarters, and it is pulling down profit margins twice as big as some of its biggest rivals in the automotive business.
If Tesla buys a metals miner, however, not only will the company incur additional cost for the purchase, but Tesla will also have to learn an entirely new business model. It will risk engaging in what investors call "diworsification" as it deploys its capital not just on what it's very good at -- building gigafactories and churning out 1 million cars per year and growing -- but also on something it knows very little about: mining.
If you recall how badly a similar move worked out for Freeport-McMoRan 10 years ago, when it made the much smaller shift from exclusively mining copper and gold to adding an oil and gas business to its holdings, you can understand why Musk's merely mentioning the possibility of this move might have investors feeling nervous today.
