Fact Pattern

On 18 December 2022, Elon Musk polled twitter on whether he should step down as CEO – promising to abide by the results. With over 17 million participants, most of the voters said yes.

Analysis

We can always count on the self-proclaimed ‘Chief Twit’ to keep things interesting. Despite most respondents of the poll voicing their belief that Musk should step down as Twitter’s CEO, the process is unlikely to go smoothly with perhaps several more twists to come. For starters, he has already voiced his opinion that there is no one more competent than him to take over, tweeting a reply on 22 December 2022 that ‘no one wants the job who can actually keep Twitter alive. There is no successor’.

Since Musk’s taking over of Twitter on 27 October 2022, he has committed to draconian actions in cutting operating costs including firing nearly half of the company’s employees and allegedly firing employees who criticised him. The problem is, he may have inadvertently cut the firm’s all-important advertising revenue as well.

Amidst the chaos, there was speculation that he may sell Twitter – and possibly for less than his acquisition price. Whilst Musk has denied any intentions to sell the company on 20 December 2022, his twisty track record may indicate otherwise. For one, any tax loss would offset the billions involved from the taxable gains of Tesla’s stock sales. The drama and the hype may all be part of Musk’s plan, so only time will tell what will really unfold.

Implications

Twitter’s win is Tesla’s loss. As Musk continues to divert his attention to his new hobby, Tesla’s share price has continued to fall, shedding approximately 67 per cent of its value YTD. To further aggravate matters, slowing demand and an incoming surge of competitors have caused investors to downgrade their Tesla outlooks. Musk may deny spending too much at Twitter, but as marketing truism will tell you: consumer and investor’ perceptions are more important than their knowledge of objective reality. In short, perception is reality. So, whilst Tesla shareholders will undoubtedly celebrate if Musk re-prioritises Tesla, even if it is just to give off the illusion, such seems unlikely in the short term. But Tesla shareholders will surely hope that he abides by his word and refrains from selling any additional Tesla stock for the next two years.