06:46 AM EDT, 07/07/2025 (MT Newswires) -- Tesla (TSLA) shares dropped early Monday following Chief Executive Elon Musk's announcement that he is launching a new US political party, a move that Wedbush Securities said could raise investor concerns about its potential impact on the electric vehicle maker.
Musk said in a social media post over the weekend that he has set up the America Party. The party is expected to "caucus independently," with legislative discussions to be held with the Republican and Democratic parties, according to the billionaire.
"When it comes to bankrupting our country with waste (and) graft, we live in a one-party system, not a democracy," Musk said in a post on X. "Today, the America Party is formed to give you back your freedom."
Musk's decision to form a new political party is "exactly the opposite" direction that Tesla's investors and shareholders would want him to take during this "crucial period" for the company, Wedbush said in a Sunday client note. Tesla investors were relieved when Musk left the Department of Government Efficiency, or DOGE, which was created by President Donald Trump, but this latest move shows a "turn for the worst," according to the brokerage.
Tesla's shares slumped 6.2% in the most recent premarket activity.
Investors are likely to be worried about the consequences facing the auto manufacturer if Trump and the Republican Party view Musk more as a foe than a friend, Wedbush analysts, including Daniel Ives, wrote in the note.
"Musk is now taking this political game to a whole new level which will take precious time away from Tesla, SpaceX, etc., and towards politics in our view," Ives said. "Given the limited success independents have seen politically in the US historically, this will be viewed as a disruptive (for Tesla) and political gamble by Musk heading into competitive congressional races in 2026."
Musk's announcement comes amid his ongoing public feud with Trump. The two exchanged heated remarks on social media last month, after Musk departed his role within the Trump administration and criticized the US leader's tax and spending bill.
"I am saddened to watch Elon Musk go completely "off the rails," essentially becoming a train wreck over the past five weeks," Trump said in a Sunday post on the Truth Social platform. "The one thing third parties are good for is the creation of complete and total disruption & chaos."
Tesla doesn't need Musk to keep feuding with Trump and create more hurdles over the coming year, especially with the company's autonomous strategy and artificial intelligence offerings in full force, Wedbush said Sunday. The brokerage maintained its outperform rating on the company's stock.