Date: 11/15/2022
Author: Mr. X
As of this writing, chaos reigns.
On Twitter, well-known users and complete nobodies are all threatening to leave the platform. Elon Musk reportedly asked Twitter employees to decide by Thursday night whether they wanted to stay at the company and adhere to his new order. The TecnoKing’s reign included long hours, no working from home, and the need to be “extremely hardcore.”
Many appear to have left. Journalists, for whom Twitter is their wine and meat, are losing their minds and leading a crusade against Musk, accusing him of ruining the platform. Someone has even set up a projector and is projecting insults against Musk at Twitter HQ.
Is Musk “ruining Twitter?” Possibly, but what’s to ruin?
The truth is that Elon Musk is probably the only person who could save Twitter. As it stood, its moderation policies were completely incoherent and dependent on Republican cowardice for surviving. The new House majority – and an ambitious Republican like Ron DeSantis (whom Musk has suggested he might support in 2024) could easily make Twitter a nationwide issue. As it stands, the Biden Administration is looking into Musk’s acquisition of Twitter on national security grounds, but it is unlikely to be blocked.
More importantly, Twitter’s advertising model wasn’t working as it stood. Musk’s policy of charging people $8 a month for a verified account is a direct attack on the status of powerful journalists, activists, and politicians – but it might be what the platform needs in order to have an independent revenue stream. And if it doesn’t work – Musk has already broached bankruptcy. It is all or nothing for him.
However, it’s Tesla [TSLA] shareholders who should be worried now. Whatever Musk’s multitask capabilities, the TecnoKing is clearly distracted right now and that could prove to be a disaster for the company.
Musk himself just had to testify in a lawsuit over the compensation package that he was given by Tesla. He said that he doesn’t want to be CEO of any company. While he said that he was extremely enthusiastic and bullish about Tesla, investors can’t be happy about the iconic executive dividing his time.
Tesla also faces significant challenges from other auto companies. General Motors [GM] just raised its profit guidance and said EVs will be profitable sooner than expected. Ford [F] is building its new EV plant in Tennessee. South Korean automaker Hyundai had its IONIQ6 sell out within 24 hours of its release.
Meanwhile, workers at Tesla’s new “gigafactory” in Texas are preparing a lawsuit over poor conditions. And they are getting plenty of sympathetic media coverage.
- “’I’m going to die in this factory’: Tesla Texas gigafactory construction workers are suing over wage theft and dangerous conditions,” Fortune, November 15, 2022
- “Tesla’s Austin factory construction workers sue over labor violations, MySanAntonio, November 15, 2022
- “Tesla’s construction workers at Texas gigafactory allege labor violations, The Guardian, November 15, 2022
For good measure, Musk is also dealing with a lawsuit at Twitter from a disabled worker.
The key problem here is that there is no longer any political cost to attacking Elon Musk. He’s picking fights with everyone from Senator Ed Markey to Rep. Alexandria Ocasio-Cortez. Senator Markey telling Musk to fix his companies “or Congress will” isn’t something that can simply be laughed off. There’s enough material that Congress could, if it wanted to, start an investigation that could quickly turn into a fishing expedition. After all, it was earlier this week when a former Tesla executive pled guilty to insider trading.
The SEC and the Department of Justice are already looking into Tesla based on the claims the company has made about autopilot. Musk has a history of making claims that can’t be backed up literally. If regulators want to hold him accountable, he will have given them plenty of material.
For that reason, I wouldn’t look at Tesla above $165. There’s a lot of short-term volatility baked in here and Musk is doing himself no favors. I have every confidence that he will actually win in the end. In the meantime, he’s made himself a political target – and TSLA a short-term liability.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing.
