«Could lead to punitive measures»: how Musk and Trump conflict threatens investors

Tesla shares collapsed by more than 15%, and the fortune of the company's head Ilon Musk decreased by $25 billion amid an escalating public conflict between the entrepreneur and Donald Trump. In the course of an extramural skirmish, the Tesla founder said that without him, Trump would have lost the election, and the US president responded by hinting that it was worth ending state support for Musk's companies. The conflict between Musk and Trump began over a budget bill that would deprive Tesla of some of its profits, but now threatens the billionaire's other businesses as well. 

Tesla shares plunged by nearly 18% to $273.2 apiece in trading on June 5 dropped. That's their lowest price in a month. The drop reduced Tesla's market capitalization by more than $120 billion - more than the combined value of automakers Ford, General Motors and Rivian, notes Forbes. Tesla CEO Ilon Musk's fortune decreased by $25.5 billion during the day, the publication calculated. 

Including Thursday's collapse, the stock is now off 32% YTD, the worst performance among the Magnificent Seven companies.

Investors are actively selling off Ilon Musk's securities amid the billionaire's escalating conflict with U.S. President Donald Trump over a new government spending bill that would eliminate tax credits for the purchase of electric cars. This week, Musk harshly criticized the bill, calling it a «disgusting abomination.» Trump on June 5 responded to the criticism for the first time publicly responded, saying he was «very disappointed in Ilon.» He said Musk knew more about the bill than anyone, but only had questions when it came to electric cars. Trump also suggested that Musk misses working in the administration and that the billionaire probably developed «Trump Derangement Syndrome» after leaving politics.

The conflict escalated further when Tesla's CEO wrote on social media that without him, «Trump would have lost the election.» In response, Trump stated that the easiest way to save billions of dollars in the U.S. budget would be to «end government subsidies and Ilon contracts.» 

Trump's threat to cut off support for Musk's business is dealing a blow to the billionaire's main source of wealth, reports Bloomberg. Tesla, to whose shares most of Ilon Musk's fortune is tied, and his space company SpaceX have benefited greatly from federal contracts and subsidies, the agency writes. 

The bill that Musk is criticizing imposes a new $250 annual fee on electric car owners and, seven years ahead of schedule, eliminates a tax credit of up to $7500 that buyers of Tesla and other electric vehicles receive. According to JPMorgan's estimate, it will cost Tesla a loss of about $1.2 billion in annual profits.

The conflict between Trump and Musk over the bill was the obvious reason for Tesla's stock collapse, said Paul Hick, co-founder of Bespoke Investment Group. «It could have further negative consequences, punitive measures,» the top executive said. He noted that because of his political activism, Musk has already lost the support of Tesla buyers with left-wing views, and if he loses the support of the right-wing because of the conflict with Trump, it is «unlikely to benefit him.» 

«First he got close to Trump, which scared off a lot of potential Democratic buyers. Now he has turned against the Trump administration,»agrees Tesla shareholder and Stock Trader Network chief strategist Dennis Dick. Musk's political views «continue to hurt Tesla stock,» he said. For his part, Argent Capital Management portfolio manager Jed Ellerbrook said the break with Trump «carries risks for Musk's other companies,» including space company SpaceX and artificial intelligence developer xAI.