Tesla shares slump pre-market as Musk plans new political party

(Sharecast News) - Shares in electric vehicle maker Tesla fell sharply in pre-market trading after chief executive Elon Musk re-opened his rift with former ally Donald Trump and said he was launching a new political party. The multi-billionaire, who has fiercely opposed Trump's recently signed massive tax and spending Bill, said the "America Party" would target a handful of Senate seats and House of Representative districts - "enough to serve as the deciding vote on contentious laws".

In typical bellicose style, Trump said Musk had "run off the rails", calling his plans "ridiculous".

"Third parties have never worked, so he can have fun with it but I think it's ridiculous," Trump told reporters traveling with him back to the White House from his New Jersey golf club.

Musk's heavy involvement in politics - including giving Trump's election campaign millions of dollars - has rattled investors after a public backlash against his work cutting back departmental budgets with little tangible benefit.

"The more Musk and Trump are at loggerheads, the greater the chance of the president taking action that could negatively impact Tesla and SpaceX (the entrepreneur's other big business). Trump has already threatened to withdraw subsidies and government contracts for these companies," said AJ Bell investment director Russ Mould.

"Tesla shares were weak earlier this year as investors grew tired of Musk spending all his time on US government work. Investors were frustrated that DOGE duties were distracting Musk from his core job of running the electric vehicle company and they wanted him back behind the wheel."

"Setting up a new party is going to require hard graft and Musk will have to press the flesh to convince people to support his political ambitions. That suggests leadership is back on the priority agenda for Tesla's board meetings, questioning if Musk can do both politics and business. The answer could be heavily influenced by the direction of the share price."

Reporting by Frank Prenesti for Sharecast.com