Introducing Inquisitorial by Indianaut, a long-form newsletter where we explain and analyze important stories stemming out of the Indian entrepreneurial ecosystem & economy. New articles every Saturday & Sunday.
(Credits: Marketwatch)
Social media has become pivotal to any corporate’s communication strategy in the 21st century. An effective social media strategy can increase sales, boost brand recognition and improve customer service. The success and game changing innovations brought about by the new-age tech startups have made their founders and CEOs household names and an inspiration for upcoming entrepreneurs. The increased interest in the startup ecosystem has led to business leaders building an online presence and a loyal following of their own.
We see these young turks sharing their trials and tribulations, milestones, sharing product ideas, teasing new releases, interacting with customers and gaining new insight. Gone are the days when CEOs used to issue press releases in response to controversies or to communicate to stakeholders. Since a lot of startups have focused on building a community around their products, these startup CEOs have become celebrities in their own right, demonstrating high levels of authenticity, animation and informality. We also see them sharing personal learnings, achievements, reacting to social issues, memes and taking on internet trolls.
There are countless celebrities who engage with their audience on Twitter and have nothing but positive interactions, while there are others who have managed to create controversies in 280 characters or less. Some have had to issue apologies, delete tweets or even face severe public backlash leading them to delete their account. Some of the notable mentions are JK Rowling for her trans-phobic tweets, James Gunn for his numerous problematic tweets and Terry Crews for his anti-BLM protest tweets, however, none of these celebrities can hold a candle to Tesla and SpaceX founder and CEO, Elon Musk.
Elon Musk, who has generally been regarded as one of the greatest serial entrepreneurs and innovators of our generation has been able to generate headline-making controversies on a regular basis. Most of his tweets are about Tesla’s upcoming updates and production capacities, the ever-growing supercharger network, SpaceX developments, Artificial Intelligence, etc. However, every so often he posts bizarre tweets and memes that leaves everyone dumbfounded.
Funding Secured Fiasco
In 2018, Tesla started production of its first mass produced car - the Model 3 and was failing to meet its production targets. During this period of intense public scrutiny, Elon Musk tweeted that he is considering taking Tesla private and had secured funding for it.
The move would have been the largest corporate buyout ever with a price tag of over $70 billion. Musk’s tweet sparked frenzied trading and Tesla’s stock price shot up. The Nasdaq stock exchange halted the stock altogether while investors cooled off. Buybacks are a complicated matter involving several board meetings and filings with the regulators. These announcements are seldom announced on Twitter. SEC launched an investigation into Elon Musk’s tweets for violating american security laws. The two parties settled the matter with Elon Musk having to pay a hefty fine of $20 million and resign as company’s chairman. Further, Musk would have to seek prior approval for posts containing information about Tesla’s share price or shareholders. Elon Musk called the Securities and Exchange Commission the Shortsellers Enrichment Commission in a tweet shortly after paying the fine.
A few months later in February 2019, Elon Musk tweeted about Tesla’s annual production numbers without the tweet being pre-approved prompting SEC to file contempt petition against Elon Musk for tweeting price sensitive information and violating the terms of the settlement. Elon Musk and SEC settled the case again increasing the ambit of posts that would have to be pre-approved.
Short Sellers Squabble
Elon Musk has often taken to Twitter to criticize and mock traders who short sell Tesla shares. Short selling is an investment or trading strategy that speculates on the decline in a stock or other securities price. He has accused short sellers for failing to realize Tesla’s vision to revolutionize the automotive sector and doubting his ability to steer (no pun intended!) the company towards back to back profitable quarters.
In late 2019, Elon Musk blasted hedge fund Greenlight Capital and its President David Eihnorn for short selling Tesla shares in a tweet. Greenlight Capital in a letter to its clients stated that Tesla was overvalued and accused Elon Musk of significant fraud. When one of the users tagged Elon Musk in an article reporting Greenlight Capital’s positions, Elon Musk responded calling the accusation false and pointing out that the hedge fund’s assets under management had fallen from $15 billion to $5 billion. He even sent a pair of shorts to David Eihorn.
That was not the last time Elon Musk took on short sellers on Twitter. This month Elon Musk unveiled a pair of “short shorts” to mark his victory against investors who had bet against Tesla. Tesla’s share price has been on a massive bull run, trading at its all time high resulting in short positions incurring losses. Shortly after Elon Musk tweeted the limited edition product was available for $69.420, the website crashed.The product description reads “Celebrate summer with Tesla Short Shorts. Run like the wind or entertain like Liberace with our red satin and gold trim design. Enjoy exceptional comfort from the closing bell.” He also tweeted that he’ll be sending some to the SEC.
In May 2020, Elon tweeted Tesla’s stock price is too high. The tweet created panic in the market resulting in Tesla stock falling more than 10% moments later. A group of Tesla shareholders filed a lawsuit against Musk for this tweet. The lawsuit was dismissed by the Court in Delaware citing injunction can’t be issued based on speculation of future conduct. Elon Musk is the only CEO who has called his company overvalued, mock short sellers for taking short positions a couple of months later and still keep his job.
The ‘Pedo Guy’ Problem
Back in 2018, Twelve members of a football team, aged eleven to sixteen, and their 25-year-old assistant coach were trapped in Tham Luang Caves in Thailand. An international effort began to find and rescue the children. Elon Musk’s The Boring Company designed and built child-sized submarines to rescue the children. Eventually, the Thai government decided against using the submarine and the mission was carried on by a team of international divers.
One of key advisors to the Mission Vernon Unsworth called Elon Musk’s efforts a PR effort with no chance of success and that Musk "had no conception of what the cave passage was like" and "can stick his submarine where it hurts". Elon Musk retorted by calling the British diver a pedophile on Twitter. He subsequently deleted the tweets and issued an apology for his comment. Vernon Unsworth filed a libel lawsuit against Elon Musk seeking $190 million in damages. Elon Musk had to apologize again during the lawsuit for his initial tweets. The jury found in favor of Musk and ruled he was not liable.
These are only a few of Elon Musk’s problematic tweets. Elon Musk has tweeted several times during the pandemic calling the fears of COVID-19 to be overstated, businesses to be allowed to reopen and taking the ‘red pill’.
Tweeting memes, backing Kanye West for US Presidential elections, choosing unusual baby names, and posting about a desire to give up material possessions are all bizarre but harmless activities, in the long run Elon Musk’s tweets shape the narrative around him and his company’s image. The situation is further aggrieved when Musk shares previously undisclosed company’s performance, targets SEC or investors. While these tweets showcase Elon’s edgy humour, at the end of the day these are totally unnecessary and raise problems for him and his companies. Elon Musk can always brave the storm, but the same cannot be said for his company’s Board, employees and shareholders, who have to go into overdrive to extinguish fires he sets off.
You can imagine the damage Elon Musk can cause to his companies through his tweets when his twitter account gets hacked and used by a scammers to steal Bitcoins but users point out that the scammers were foolish and would have made more money by buying puts and tweeting something like “can’t believe people are buying Tesla stock at this level”.
Ravneet Singh is a final-year law student at Campus Law Centre, University of Delhi and holds a B.A. (hons.) in Business Economics.