From PACs to Portfolios: Billionaire Bets and Investor Reactions

Key Points

• Elon Musk has emerged as a major political activist and donor in the months leading up to the 2024 election.
• Two publicly traded firms affiliated with the billionaire—PayPal and Tesla—have seen share prices rise in the last year.
• Tesla has faced increasing competition from Chinese rival BYD and the fallout from a disappointing robotaxi event in recent weeks.

Billionaires and their families spent an estimated $1.9 billion supporting presidential and congressional candidates in the 2024 election, a record that approached twice the spending logged in the lead-up to the 2020 election. With billionaires spending huge sums of money in an effort to sway the election, investors may be wondering how the broader public has reacted to this activity. One metric—though only a piece of the larger puzzle—is the reaction of investors to publicly traded companies affiliated with these billionaires. In the case of Musk, who leads or is otherwise closely tied to several different firms, two major companies to watch are PayPal Holdings Inc. NASDAQ: PYPL and Tesla Inc. NASDAQ: TSLA.

PayPal: Share Price Up, New CEO Marks One Year

Musk is a co-founder of PayPal and was once the CEO of the payments firm. His connection with the company now is largely nominal, although the firm is also tied to another politically active billionaire, Musk's co-founder Peter Thiel.

PayPal shares have risen by nearly 50% in the last year, an impressive performance that easily outpaces the broader market. However, stepping back and looking at the company's broader stock history, shares of PYPL remain just a fraction of what they were at a peak just over three years ago, and their trajectory has been relatively flat for much of the post-COVID recovery period.

The question is what might have prompted PayPal's rise in recent quarters. It seems likely that, alongside other payment companies and related firms, the market's anticipation of the Federal Reserve's first rate cut in multiple years in September helped to drive some of this growth.

Also likely to influence PayPal's recent rise is CEO Alex Chriss, who began in this role in September 2023. Chriss has prioritized increasing the monetization potential of Venmo, increasing total payment volume, and reversing course on take rate—the percentage of revenue the company draws from each transaction—which had been declining. So far, these goals have seen mixed success. In the company's third quarter, it reported a 9% year-over-year improvement in total payment volume, just ahead of analyst predictions. The take rate, however, fell to 1.86% from 1.91% last year at this time.

Tesla: We, Robot Issues and BYD Competition

Musk co-founded Tesla and has led the EV maker as CEO for close to two decades. He is much more closely involved with the company on a day-to-day basis than he is with PayPal. Tesla's stock price has also been rockier than PayPal's, although there are several reasons this may be the case.

In October, Tesla unveiled a number of new technologies and product designs at its 'We, Robot' robotaxi event, but the market's response was lukewarm at best. Indeed, shares of the firm fell the next day amid criticism that the event lacked details about how and when these products might make it to market.

A bigger problem for Tesla, though, maybe its Chinese competitor BYD Co. Ltd. OTCMKTS: BYDDY. As one of the largest EV firms in a space that is highly saturated, BYD has secured hard-won share in a fast-growing market. This is now paying off in terms of top-line performance that recently outpaced Tesla's. BYD posted third-quarter revenue of $28.2 billion, up 24% year-over-year. For the same period, Tesla's EV sales totaled $25.2 billion.

While this is not a cataclysmic situation for Tesla, it is nonetheless a warning for the world's largest EV company by market capitalization. Certainly, investor concern that Musk may not have been dedicating sufficient attention to the car maker is not helping, too.

Role of Election?

It's important to note that Musk's role in politics—prominent though it may have been in national media in recent months—is not necessarily tied to the performance of these companies. Still, they may receive heightened scrutiny by investors (and potential customers) at a time when Musk's name is particularly common in headlines around the country.