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Investing.com-- Tesla shares fell sharply after CEO Elon Musk said he will launch a new political party, as investors fear that the move will likely further divert his attention away from the company.
The stock was down over 7%, trading at $292.8 in premarket hours as of 04:22 ET (08:22 GMT) on Monday.
Brokerage firm Wedbush warned in a Sunday note that the announcement could put pressure on the automaker’s shares.
It argued that Musk diving deeper into politics is “exactly the opposite direction” that Tesla (NASDAQ:TSLA) investors and shareholders want from the CEO, especially as the electric car company grapples with declining sales and prepares a pivot into autonomous vehicles.
Musk’s announcement of the “America Party” also comes amid a bitter public feud between the Tesla CEO and U.S. President Donald Trump, especially over the recently-approved “Big Beautiful Bill.”
Wedbush noted that while Tesla investors were initially relieved by Musk stepping down from DOGE, this relief was likely to be short-lived with Musk’s latest move presenting a turn for the worse.
“Tesla shares will likely be under some pressure tomorrow as investors worry about the implications if Trump and (the) Republican party view Musk more as a foe than a friend now,” Wedbush analysts said.
They noted that independents had a poor track record in the U.S., and that the America party venture was likely to be disruptive for Tesla and a political gamble by Musk.
Wedbush flagged the potential for Tesla’s board also getting involved, depending on how far Musk takes his political endeavors.
Tesla shares are trading down nearly 17% so far in 2025. While they came off their annual lows, they still remained under pressure from months of declining sales, and more recently, concerns over Musk’s political actions.
Wedbush still maintained its Outperform rating and $500 price target on Tesla, remaining “firmly bullish” on the EV maker’s artificial intelligence ambitions.
The company had recently tested an autonomous driving service in Austin, Texas, albeit to limited investor cheer. Tesla is also seeking to foray into robotics with its Optimus robot, which Musk claims will go into production by 2026.
(Ambar Warrick contributed to this report.)