The steeply plunging stock prices of Tesla have Korean small investors who bet the majority of their fortunes on the global electric vehicle automaker in tears.
Tesla fell 11.4 percent on Tuesday, closing at $109.1, on media reports that it plans to reduce output in Shanghai, China.
Tesla has even dropped out of the 10 biggest U.S. companies. It fell to the 16th largest company in the U.S. in terms of market cap, down from the 10th largest.
Compared with its peak in November last year, Tesla’s shares have fallen 73 percent. This year alone, they fell 69 percent on decreasing demand amid concerns of a recession and the acquisition of Twitter by CEO Elon Musk.
Many small investors in Korea are having sleepless nights following the plunge. Investing in U.S. stocks has been booming here, especially since the outbreak of COVID-19. Tesla was definitely their top pick. According to the Korea Securities Depository, Korean investors net-purchased around $2.75 billion in Tesla stocks so far this year. The company takes up 22 percent of their total net purchases of U.S. stocks.
However, Tesla stocks have fallen more than twice as much as the stock of Samsung Electronics ― the top pick of small investors in the Seoul bourse ― which fell by around 27 percent this year.
To make things worse, the stabilizing won-dollar exchange rate is adding to the concerns of Tesla investors. The won-dollar rate soared to above 1,430 in September, the highest level since the 2008 global financial crisis, as the U.S. Fed took a hawkish approach to raising the key rate. Ironically, the plunging value of the Korean won helped investors in Tesla stocks here somewhat offset their losses, as the value of the dollar-denominated stock rose when converted to Korean won.
As the won-dollar rate has since stabilized to below 1,300 won, however, these investors have lost any such protection.
In online forums of Koreans investing in U.S. stocks, a number of posts can be found blaming Elon Musk.
“A good CEO should not talk too much. It is deplorable for a company that has good technology,” a Tesla investor wrote.
“It is difficult to invest in the Tesla stock for the long term due to the risks surrounding Musk,” another investor noted.
However, some noted that it isn’t right to blame Musk when even the CEO himself said that the stock price was too high.
On top of falling demand and risks over the CEO, the outlook for Korean investors is not bright for the short term as the won-dollar rate is expected to fall further. “With the U.S. Fed slowing down the pace of the key rate hike while the European Central Bank (ECB) is raising the key rate, the strengthening of the dollar will somewhat ease,” the Korea Institute of Finance noted in its 2023 outlook.
Yim Eun-young, an analyst at Samsung Securities, said that Tesla and Elon Musk are inseparable. “Tesla consumers were enthusiastic about Musk’s vision and his way of solving problems. They waited for the development of technology by Tesla and ardently gave feedback in their relationship based on companionship.”
The analyst added that Musk should “concentrate on Tesla before the fandom of consumers rapidly cools off and it becomes irreversible.”