Originally published on LinkedIn by me on May 17, 2022.
On February 17, when preparing to post a newsletter update answering if Tesla was beating automakers in the U.S., it was necessary to begin with the following unrelated preamble in response to Elon Musk’s latest ill-advised tweet at the time.
“Just as I’m about to post my latest newsletter update, there’s this from Elon Musk.”
“I’m long Tesla stock (although I’ve reduced my Tesla exposure significantly over the past several months). Owning Tesla shares means putting up with the petulance of its CEO. Musk is like a great athlete who’s a pain in the ass to have on your team. Twitter has become a useful PR and marketing tool for Musk and Tesla. After all, the company spends no advertising dollars. But it also exposes much of the negative aspects of Musk as a person. As an investor in the company, this part of Musk’s personality is becoming more troubling. I’ll cover the challenges of continuing to be a Tesla shareholder in a future newsletter update.”
Today, Musk’s potential acquisition of Twitter is another very public headache for Tesla investors. Mid-day today, Twitter stock is only priced slightly above $38 per share, significantly below Musk’s offer of $54.20 per share ($44 billion) to acquire the company. Now it seems Musk either wants to get out of the Twitter deal entirely, or he’s trying to negotiate a lower price using his favorite public communication tool, Twitter itself. Musk posted last week that the Twitter deal is “temporarily on hold” until he could confirm the number of fake or bot accounts on the site. His subsequent tweets on the subject have become even more strange and inappropriate (like the poop emoji in response to Tweets from Twitter’s CEO). Some of his additional Tweets about Twitter might actually straddle the line of legality relative to SEC rules.
As The Information asked this week, “where is SEC Chair Gary Gensler when you need him,” believing that current rules are useless when dealing with Elon Musk. The publication asserted that Twitter investors (and by association, Tesla investors) are at the mercy of Musk’s next tweet given the impact his tweets have on the direction of both stocks. As Bloomberg believes, nothing has changed about the Twitter bot problem since Musk signed the merger agreement, asserting that he knew about the bot issue since he talked about wanting to fix this constantly. Further, the merger agreement does not allow Musk to reprice the deal just because the stock price of Twitter has declined. Bloomberg believes Musk is pretending that he wants to reprice the deal for reasons (bots) other than Twitter’s low stock price.
As Musk stated recently, no automotive company in history has grown as quickly as Tesla has grown (not even Ford Motor Company as its Model T scaled to nearly 1 million vehicles by 1921). Many experts doubted the ability of Tesla to scale and become profitable as fast as it has, even questioning the ability of the company to survive at all. What Elon Musk is accomplishing with Tesla is amazing. Yet, he often acts like a petulant child, often ignoring or pushing the boundaries of what is responsible (and sometimes of what is legal). For me, Tesla stock has returned 186% per year since 2018 (dollar weighted compound annual growth rate). Should Tesla’s stock performance overshadow Elon Musk’s behavior? Or might Musk’s behavior eventually impact the business of Tesla?
What I’m Reading, Watching, and Hearing
Elon Pauses Twitter Bid, Pivot Podcast, Kara Swisher / Scott Galloway
Disclaimer
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