Twitter Turmoil: Testing Investor Patience

Compounding controversial headlines and backtracking have put Twitter and Tesla’s futures in jeopardy, as users turn to Mastodon as a social platform alternative and investors dump Tesla stock, according to reporting by CNN Business and Bloomberg. Overall, as both companies struggle ahead of a forecasted economic recession, how long will it be before investor patience runs out?

Twitter 

In the two weeks since the purchase and privatization of Twitter, Musk has announced various plans for the platform including a new verification system and cut his global workforce by half–both of which he has since had to walk back. Whiplash and confusion from these events have hurt the company significantly, losing an estimated US$4 million a day, according to an internal company memo posted on Slack. Musk then used this information to justify the company’s downsizing, terminating all of the company’s staff in Mexico and 90 percent of staff in India. 

While this potentially in-line with apprehensive layoffs by other technology companies, the volume of layoffs effectively compromised the company’s ability to realize Musk's business project. It was not long after that some were contacted and asked to come back on the grounds that they had been “fired in error or too essential” to the business changes the billionaire had in mind. Those that remain now have to cope with changing work culture as Musk dispels the company’s monthly days off for employees to rest and recharge, in an effort to implement a “24/7” work culture, according to Yahoo Finance. 

Meanwhile Twitter users have responded in kind by migrating in mass to Mastodon, a small nonprofit social media network with a similar look and configuration to Twitter. Following Oct. 27, Mastodon has gained 230,000 users, and now counts with 655,000 active users each month, according to its Founder and CEO, Eugen Rocho. However, because Mastodon relies on servers run by different groups and individuals as opposed to a single central platform, it introduces a learning curve for new users such as finding friends outside of your server and deciding what to post with a smaller audience, according to Rachel Metz, Senior Writer, CNN Business. 

Tesla 

Meanwhile, the worst has come to pass for the Tesla investors who anticipated that Musk would be stretched out too thin after the purchase of Twitter. Tesla investors had wanted the magnate to focus on helping the company overcome a foreseeable market defined by volatility, low demand and continued supply chain challenges, according to Bloomberg. However, Elon Musk’s continued negligence of Tesla and his observed handling of Twitter have put off investors, igniting a sell off that has virtually wiped out Tesla Inc.’s gains from the past 17 months to a 17-month low. 

Adding insult to injury, Tesla announced the recall of over 40,000 2017-2021 Model S and Model X vehicles that may experience a loss of power steering assist, according to a voluntary filing with the National Highway Traffic Safety Administration. This is the EV automakers’ 17th recall in 2022. Previous recalls followed the detection of problems with seat belt chimes, overheating infotainment systems and a full self-driving bug, among other issues. This latest announcement has incurred additional damage to the company’s already struggling stock, which dropped to just above US$190, lower than it was in May 2021. 

With that, the EV company closed Tuesday Nov. 8 with a market valuation of US$604 billion, effectively demoting Tesla from fifth to sixth place in the S&P 500 index, according to Business Times. Taking its place is Warren Buffet’s conglomerate with a valuation of US$645 billion, underscoring the volatility of formerly dominant technology stocks and the resiliency of industrial companies that outperformed slouching technology stocks.