My Response To Elon Musk (Why Tesla Is Screwed)

What's up, Elon? It's Twitter here, and it's not every day I make a video like this, but we gotta talk about what's going on with Tesla. Because I have to say, as a two-time Tesla owner, a Tesla stockholder since 2019, and as an investment channel here on YouTube, I've been steadily watching as their share price ballooned to one of the largest companies in the world, to now following a staggering 70 percent decline, while short sellers like Bill Gates have made an absolute fortune. Not to mention I’ve been following this company extremely closely, as it used to be my single largest stock position by far.

So, I feel compelled to share my thoughts and discuss what's going on, since I do still have some skin in the game, and I owe a lot to Tesla. But I have concerns about their future and potential legal troubles that are worth breaking down, both as an investor and as an owner. Although, before we start, as Mariah Carey would say, all I want for Christmas is for you to hit the like button or subscribe if you haven't done that already. And if you actually do it, or if this video gets 69,000 likes, I will stop asking for the rest of the year. So thank you guys so much! And also, a big thank you to public.com for sponsoring this video, but more on that later.

Alright, so in terms of my own involvement with Tesla, it all began in 2019 when I purchased a Tesla Model 3. Prior to then, I was never a Tesla fanboy, but I gotta say, once they took delivery, I immediately saw what everyone was talking about. You never really get all the hype until you get behind the wheel. Within seconds of driving the car off the lot, I was absolutely infatuated with every aspect of it. So, as soon as I got home, I thought to myself, if I enjoyed the car this much, chances are everyone else will too. So, I made an investment back when the stock was trading at now what would be $17 a share.

I never really thought much of it, and I just thought it would be cool that if the price of the stock did well, maybe that would be enough to pay for the sales tax on the car. But little did I know that would just be the very beginning. Now, even though $17 a share was an absolute deal in hindsight, I remember the moment they bought the stock; it just immediately greatly tanked. It kind of felt as though everyone out there was waiting for the moment for me to buy in, and as soon as I did, they could start dumping their shares. Because within a few months, I was down about 30 percent.

It was just more bad news after more bad news. They saw their biggest sales drop in history; they were burning cash; earnings were horrible, and they were one of the most shorted stocks on the market. But even though I was down, I just held on, thinking that I invested in amounts that I was comfortable losing and I may as well just give it a few years to see how it plays out. Well, sure enough, that was almost four years ago, and as I held on, at the peak, those original shares were up over 2,000 percent. But even though I believed I'd be holding onto the stocks forever, I thought the writing was on the wall to begin selling off, and a few of the signals are eerily similar to what I think we're beginning to see today.

To start, the first time I began selling was back in February of 2020 when the price of the stock went from $17 to $60 a share, with most of that movement happening in just a few weeks. Back then, there really wasn't a single reason for the stock going up 300 percent in price, but the thinking was that since Tesla was heavily shorted, a series of good news, like topping Wall Street expectations or opening up a Gigafactory in China, would send short sellers to cover their positions, adding a lot of demand and shooting the stock even higher. Frankly, at that point, I became concerned that excitement was driving the market way more than logic.

So, I sold half of my position, 3x-ing my money in less than a year. Right after that, I'm not gonna lie, I looked like a genius, but I made the mistake of not being able to time the bottom. Because right after that, the market went crazy. From March of 2020 to January of 2021, Tesla stock increased almost a thousand percent, fueled by record low interest rates, a five-to-one stock split, and excessive interest in the stock market that pushed valuations higher than I ever could have imagined.

Then throughout the end of 2021, things got even crazier with the announcements that Hertz was planning to order a hundred thousand Teslas for their fleet, Uber said they'd offer up to 50,000 cars to their drivers, California issued a mandate that all new cars must be zero-emission by 2035, and with some people saying that Tesla was 10 years ahead of the competitors, people bought in while the stock was soaring higher. Although the reality is, the faster something goes up, the quicker it could also go down. At its peak, Tesla was valued more than the next ten automakers combined, even though they delivered only a fraction of the cars.

And that is where we get into a few of the recent problems. In November of 2021, near the peak of the market, Elon Musk posted a poll on Twitter asking his followers if he should pay his fair share in taxes by selling 10 percent of his Tesla holdings. Personally, I felt like this was his way of being able to cash out of the stock during a time where it was trading at unrealistic expectations, and I have a feeling he knew this, and he used the audience to his advantage to pay taxes. Sure enough, shortly afterwards, the Federal Reserve began raising their interest rates, and the entire market began to fall, which included Tesla. It appeared as though Elon Musk picked the perfect time to sell.

Then again, in April of 2022, when Tesla stock had almost completely recovered back to its 2021 high, he offered to buy Twitter for $44 billion, which, you guessed it, would also require him to sell off even more of his Tesla stock. Unfortunately, though, in the months leading up to the sale, his Tesla stock, which he'd be using as collateral, fell about 40 percent in value. So, as you would expect, he tried to get out of the deal, but months later he wound up conceding and sold another $7 billion of Tesla stock, taking Twitter private. Then again, in November, he sold another $4 billion of Tesla stock, which is theorized to have funded operations to Twitter, and then again in December he sold another $3.6 billion.

In total, throughout the last year, he sold about $40 billion in value from the stock, while investors argue that he's taking money from Tesla to plug the losses of Twitter, which he had no reason to buy in the first place. Although this is really only the tip of the iceberg, and the rest is something that not a lot of people are talking about. Although before we go into that, when it comes to the stock market, our sponsor, public.com, wants to help you get started on the right path by giving you a chance to receive a free stock worth all the way up to a thousand dollars, but we'll cover that shortly.

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Alright, so in addition to the stock performance, there are also potential concerns with the technology—mainly autopilot. The company is currently facing a class action lawsuit from those who have purchased full self-driving, claiming that they've paid for it, but they've yet to receive it. In fact, just take a look at this: in 2019, he said it would be available in 2020. In 2020, he increased the price and said it would be available in 2021. He also said the feature is worth a hundred thousand dollars. Then again, in 2021, he said that level 5 self-driving, requiring no human intervention, would be available by the end of 2021. But a few months later, he claimed he never said that.

Then again, in 2022, he said it would be available by the end of the year. And now that it's at the end of the year, we're looking back to Elon Musk to tell us when we could next expect it to be delivered. Now, the issue though isn't so much broken promises, because delays happen and regulation can sometimes take forever, but instead it's the fact that customers have paid anywhere from three thousand to fifteen thousand dollars for features that may never be approved. Or as Elon Musk says, could take another few years. To put it another way, some people argue that buying full self-driving is really no different than giving Tesla an interest-free loan for an indefinite period of time, which would constitute false advertising.

And the California DMV claims that he's gotten around prior regulation by requiring human intervention, allowing them to gather data without saying that it's full self-driving. Now, when someone has bought full self-driving for the purposes of testing it out on a YouTube video, a few years ago, even though it's fantastic on the highway, it's really, really glitchy in person. Anyone who has used it will tell you that it randomly just brakes out of nowhere. Sometimes it won't identify an object until it gets really, really close, and some research suggests that their driver disengagement rate was significantly worse than the competition.

However, Elon Musk believes that the real culprit falling stock prices is the Federal Reserve, whose hike rates the fastest pace ever in history. Under this, he believes that higher risk-free returns are making the stock market less appealing, and fewer people want to buy in. And in a way, he's correct: like treasury bonds are currently paying between four and a half and five percent, very safe corporate bonds are paying six percent. So why would you take a risk with stocks which have historically averaged seven percent? Many other companies are down just as much, if not more, even without the theoretic behavior, selling pressure, full self-driving claims, and buying Twitter.

In addition to that, you also have the fact that EV sales are declining from China's recessions, so Tesla might have to cut their production. They've also seen a decline in interest here in the United States as Tesla begins to cut prices, and many investors are worried that Twitter has become a distraction while Tesla falls to the side. Now, Elon Musk believes that this could be a buying opportunity, but personally, I just want you to consider this: take a look at the S&P 500 from 20 years ago. These were the top 25 largest holdings. You notice anything? Well, it probably shouldn't come as a surprise that none of them are in the top list today.

If we go back another 20 years to 1980, you'll notice again that it's almost completely different from where it was in 2000. In fact, it was found that the average return of the top 25 largest companies from 2001 is 92.94%, but over the same period, the S&P 500 has returned 310 percent. This means that the companies who are currently at the top rarely ever stay at the top for more than a decade. The highest returns tend to come from all of the other companies who eventually grow at a faster pace. Not to mention, wild valuations are nothing new. Yahoo was once thought to be unstoppable while Cisco was the king of the 90s before losing more than 95% of its value.

Point being, it's extremely uncommon for companies to retain their value and increase it over time. And even though I'm a huge fan of Tesla, I'll admit I thought their prior evaluation made absolutely no sense. Even as a Tesla owner, I think a lot of people just bought into this dog thinking it was an easy way to make money or just as an investment into Elon Musk rather than the product or company itself. I say this as someone who put their money where their mouth is when earlier this year I sold off a big chunk of Tesla at $350 a share so I could further diversify and buy a 2010 Tesla Roadster.

I still own a few hundred shares just to see what will happen, but I am continually disappointed by their promises and lack of follow-through. For example, just take a look at the Tesla Roadster: in 2017 he said the car would be ready in 2019. Then, in 2019, he said it would be ready in 2020 while taking customer deposits of fifty thousand dollars. Then, in 2020, it was set to release in 2021, then in 2021, it was delayed to 2023, and now he says— I can't even make this up—that the car is going to hover. I'm not holding my breath.

Point being, there's a history of promises and delays. It could be a conflict of interest if Elon continues to fund Twitter with shares of Tesla, and we're coming off of one of the most irrational and exuberant markets of the last two decades. But then again, I personally think that Tesla's never a stock that traded on the fundamentals, and from my perspective, a lot of people just buy the stock as an investment in Elon Musk to make the best company he can. So, my overall thought is that with something like this, don't invest more than you're willing to lose.

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