Tesla's Twitter overhang has only just begun

The phrase "Twitter overhang" was inescapable among Elon Musk's biggest fans on the social media platform he started pursuing seven months ago.

Tesla shares fell into a funk after Musk took a stake in Twitter, agreed to buy it and then tried to wiggle out of the deal. Bulls theorized that the stock would recover once the saga was over. Some even celebrated when the deal closed last week by selling merch with the words "Twitter Overhang Lifted" and an arrow pointing to the moon.

So much for that.

Tesla shares didn't react much after Musk clinched the acquisition, then took a whack along with much of the market Wednesday, when Federal Reserve Chairman Jerome Powell said the central bank will keep raising interest rates to tame inflation. The stock is now trading below where it was when the Twitter deal closed, and monetary policy may be the least of the carmaker's concerns over the coming months.

It's long been the case that Tesla is on one hand highly dependent on Musk, and on the other hand had to share its chief executive officer with his several other businesses. "Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla," the company says in quarterly filings.

Now that the Technoking is also Chief Twit, he's up to running five enterprises: Tesla, SpaceX, Twitter, Neuralink and The Boring Company. And anyone who thought Musk would draw clear lines between his newest venture and his most valuable one hasn't been paying attention.

Before Musk officially closed his deal, it began to sink in that Twitter's problems had become Tesla's, at least to a degree. Bloomberg was first to report that Musk had asked some of the car manufacturer's engineers to meet with product leaders at the social media company's San Francisco headquarters and review its code.

According to CNBC, dozens of the more than 50 Tesla staffers dispatched to Twitter were uprooted from Tesla's Autopilot team. That group is familiar with being under the gun, having been unable to realize their leader's self-driving vision. Last week, it emerged that statements the company has made about its technology are being investigated by the U.S. Justice Department and Securities and Exchange Commission.

Even if the Tesla engineers' detour ends up being short-lived, there are other ways Twitter could continue to drag on the electric-vehicle leader. The company recently disrupted three China-based operations that were covertly trying to use the service to influence American politics in the months leading up the midterm elections, the Washington Post reported this week.

Tesla is now caught between a rock and a hard place, facing potential blowback from China if Twitter continues to thwart these sorts of influence campaigns, or from the U.S. if it fails to do so.

And Tesla has an awful lot at stake: its factory in Shanghai has quickly become its most productive and important in the world, with stated capacity to make more than 750,000 vehicles a year. The company derives almost a quarter of its revenue from China — more than $5.1 billion just last quarter. Musk's dependence on the Chinese Communist Party already was a concern in Washington, and lawmakers' qualms will only be exacerbated by his ownership of Twitter.

When Alex Stamos, the former chief security officer of Facebook, posited last week that Musk had made "a huge mistake," he called out precisely these risks.

"The people who should really be angry are $TSLA shareholders," Stamos tweeted. "The company they partially own has now become the key hostage for countries looking to control the future of online speech."

If key shareholders are upset, they aren't being public about it yet, though that could change. Tesla has given investors until Dec. 22 to submit proposals to be included in its next proxy statement. The company has scheduled its annual meeting for May 16.

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