Tesla shares plummeted nearly 7% on Monday, erasing approximately $68 billion in market value as investors reacted to CEO Elon Musk's weekend announcement launching his new "America Party" political organization. The dramatic selloff came after Musk formalized his break from President Donald Trump's administration, marking the end of what was once considered one of the most powerful business-political alliances in modern history.

The Political Earthquake That Shook Wall Street

Musk officially declared the formation of the America Party on his social media platform, X, positioning it as an alternative to the two major U.S. political parties following his highly publicized feud with Trump over the president's massive tax and spending legislation. The announcement sent shockwaves through financial markets, with Wall Street analysts and investors citing growing fatigue with Musk's increasingly controversial political activities as a key factor behind the sell-off.

The billionaire's political gambit represents a stunning reversal from just months ago when he was considered Trump's "first buddy" and led the Department of Government Efficiency. Musk, the world's richest man who spent at least $250 million supporting Trump in the 2024 election, could impact the 2026 elections determining control of Congress if he is willing to spend significant amounts of money. Trump responded by calling Musk "completely off the rails" and dismissing the third-party effort as a "train wreck."

The $15 Billion Personal Cost

The market punishment wasn't limited to Tesla shareholders alone. Musk's personal fortune dropped by as much as $15 billion, according to the Bloomberg Billionaires Index, demonstrating how CEO political activities can directly translate into massive personal financial consequences. The wealth destruction occurred despite Musk's status as the world's richest person, underscoring the magnitude of investor concerns about his latest venture.

Tesla's board and major institutional shareholders now face the uncomfortable reality that their CEO's political activities are creating significant volatility in the stock price. The timing is particularly challenging given Tesla's ongoing efforts to maintain its leadership position in the competitive electric vehicle market while expanding into autonomous driving and energy storage.

The Political Machinery Behind the Scenes

Musk's push to form a new political party is fielding offers for help from Andrew Yang's Forward Party, the Libertarian Party and several consultants, suggesting the effort has already gained organizational momentum beyond Musk's initial social media announcement. Being the world's richest person also will help Musk -- where there's money, there are consultants and advisers, indicating serious infrastructure is being built for the 2026 midterm elections.

The America Party's formation comes with significant regulatory and logistical challenges. Musk's America Party is unlikely to become a certified political party anytime soon, because the Federal Election Commission, which reviews political organizations' qualification as political parties, has not been in quorum to do so since a commissioner resigned in April. However, political experts suggest Musk could still influence congressional races through super PACs while working on formal party certification.

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Business Empire Under Pressure

The political controversy adds another layer of complexity to Musk's already demanding role managing multiple companies including Tesla, SpaceX, and X (formerly Twitter). His reignited feud with the president could also be costly for Musk, whose businesses rely on billions of dollars in government contracts and publicly traded company Tesla has taken a hit in the market. SpaceX, in particular, maintains significant contracts with NASA and the Department of Defense that could potentially face scrutiny.

The timing of Musk's political announcement also coincides with increased competition in the EV space and ongoing questions about Tesla's autonomous driving timeline. Investors are now forced to weigh Tesla's fundamental business prospects against the additional volatility created by Musk's expanding political activities.

The Ripple Effect Across Markets

Tesla's dramatic decline sent ripples through related sectors, with other EV stocks experiencing mixed reactions as investors pondered whether Musk's political distraction could benefit competitors. The selloff also raised broader questions about CEO activism and its impact on shareholder value, particularly for companies led by high-profile, politically active executives.

The high cost of launching a political party may not be a big stumbling block for Musk, whose net worth exceeds $350 billion according to Forbes and Bloomberg's valuations. However, the market's swift and severe reaction suggests investors are concerned about divided attention and potential regulatory backlash affecting his business operations.