Tesla shares dive as investors fear new Elon Musk political party will damage brand

Shares in Tesla are heading for a sharp fall in the US as investors fear Elon Musk’s launch of a new political party will present further problems for the electric carmaker.

Tesla stock was down more than 7% in pre-market trading on Monday, threatening to wipe approximately $70bn (£51bn) off the company’s value when Wall Street opens.

If the shares fell by that much, Musk would see the value of his stock fall by more than $9bn to about $120bn. The Tesla and Space X boss remains comfortably the world’s richest person, with a wealth of about $400bn, according to Forbes.

Tesla is valued at just under $1tn but its shares have come under pressure due to the Tesla CEO’s relationship with Donald Trump.

First, Musk’s strong support for the US president created a consumer backlash and now the antagonistic turn in his relationship with Trump has investors worried Musk will be distracted from his day job, or that the White House will punish his businesses.

Dan Ives, analyst at Wedbush Securities, said Musk’s announcement that he is bankrolling a US political party will alarm investors.

“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,” Ives said, adding that there was a “broader sense of exhaustion” among Tesla investors that Musk – the company’s largest shareholder – will not stay out of politics.

Trump on Sunday called Musk’s plans to form the America party “ridiculous”, launching new barbs at the world’s richest person.

In a post on the Truth Social tech platform, Trump wrote: “I am saddened to watch Elon Musk go completely ‘off the rails,’ essentially becoming a TRAIN WRECK over the past five weeks.”

Musk announced the creation of the America party on his X platform at the weekend. He wrote: “When it comes to bankrupting our country with waste & graft, we live in a one-party system, not a democracy. Today, the America party is formed to give you back your freedom.”