Elon Musk the ‘Technoking’ is so erratic that Tesla needs to rein him in

Tesla TSLA Elon Musk

Even after briefly checking the box “the richest man in the world” (before Jeff Bezos recaptured it) and after surpassing the 50-million-followers threshold on Twitter, Elon Musk’s megalomaniac aspirations are insatiable.

This time, the eccentric multibillionaire thought it time to declare himself a king. And embarrassingly, he did just that. In a filing with U.S. authorities in mid-March, Tesla changed Musk’s official title from CEO to “Technoking of Tesla.”

Musk’s style is clearly unique and whether you like him or not is a matter of personal taste. A recent survey found that while 70 per cent of Americans think he’s a genius or a madman and 45 per cent admire his passion and commitment, 35 per cent hate his arrogance and seven per cent simply think he is a jerk.

But independent of how one feels about him, there is little doubt Musk, who has created a cult of followers, has the power to move the markets. In that same survey, 37 per cent of Americans said they made investments after Elon Musk’s tweets or at least considered it.

Equipped with so much power, one would hope Musk would treat his fan base in a responsible manner. But with his head turned by success, “Papa Elon” — as his Reddit fans call him — can’t keep his fingers off Twitter, tweeting as recklessly as any addicted social-network user who can’t wait for his next dopamine hit.

Musk’s irresponsible tweeting got him in trouble a few years ago when Tesla was struggling financially. On Aug. 7, 2018, he tweeted that he could take Tesla private at $420 per share (a substantial premium to its trading price at the time) — that funding for the transaction had been secured, and that the only remaining uncertainty was a shareholder vote.

These false tweets resulted in charges brought by the U.S. Securities and Exchange Commission, and eventually in a $40-million (all figures U.S.) fine settlement. Musk was also stripped from his title as Tesla’s chairman, and additional governance measures were implemented at the company.

In January, after WhatsApp, the popular messaging and voice app, informed its users of a change in its privacy policy, Musk tweeted “use Signal,” with no further comment. What Musk had in mind is a recommendation to use WhatsApp’s competitor app — Signal.

But naïve investors who didn’t fully understand the context of his tweet and consider every word he types on Twitter precious investment advice, rushed to buy the shares of a small company from Texas, Signal Advance, which has nothing to do with Musk’s tweet. Signal Advance’s share price jumped from about $2 a share to $38 over the course of a day. It later reversed all the way down, generating losses to those who jumped the gun.

But the Technoking doesn’t seem to learn from his own mistakes and he continues to bombard his Twitter followers with bad advice.

Another example is Musk’s fascination with cryptocurrencies dogecoin and bitcoin.

The former was created as a joke in 2013according to its own creators, and is considered extremely speculative. But Musk finds it amusing to encourage his followers to buy the currency, exposing them to huge risk.

On Jan. 28, Musk posted a fictional cover of the magazine “Dogue” (like “Vogue”) sending the obscure digital currency as much as 800 per cent higher. In subsequent days, dogecoin’s price fell dramatically.

Then, on Feb. 8, additional tweets by Musk sent the parody-currency 37 per cent higher, collapsing again later that week.

And as if the first few dogecoin tweets weren’t enough, Musk tweeted again on April 1 that “SpaceX (a company he owns) is going to put a literal Dogecoin on the literal moon,” sending it 29 per cent higher to $0.07 apiece. Those who bought it at that price, lost more than 20 per cent on their investment in just four days.

An additional tweet on April 15 by Musk (retweeted more than 40,000 times) helped pump dogecoin’s price as high as $0.43 in extremely volatile trading.

Bitcoin, the most established digital currency, also received a huge boost after Musk disclosed that Tesla bought $1.5 billion worth of it and will be accepting it as a form of payment.

Here, Musk’s actions are even more puzzling. Bitcoin is a highly controversial investment, considered by many, including legendary investor Warren Buffett, to have no fundamental value.

Yet Musk decided to directly invest in the volatile currency. Musk maybe a brilliant engineer, but what makes him an expert in cryptocurrencies?

Moreover, why should Tesla’s shareholders be exposed to this additional risk? After all, they bought shares of Tesla in order to get exposure to a company that makes electric vehicles and batteries, not to gamble on bitcoin.

While it’s true that other large corporations such as Yum Brands and Starbucks are also experimenting with accepting bitcoin as a form of payment, which ultimately will result in exposure to the digital coin, buying it directly with Tesla’s cash reserves is nothing but pure speculation.

Tesla still needs to prove that it deserves its extremely rich valuation — more than $640 billion — and that it’s not going to be classified in history books as one of the biggest asset bubbles in the history of financial markets.

For that, it needs a focused, responsible CEO, and not an impulsive “king” who jointly with his CFO — now officially called “Master of Coin” — makes speculative and hasty decisions.

Currently, Musk is not only abusing his position as a corporate celebrity by producing a stream of misguided tweets packed with bad advice that are hurting regular investors. He is also posing a risk to Tesla’s shareholders.

It is up to Tesla’s board to discipline Musk, but if that is not achievable it should seriously consider replacing him. This may at first sound unthinkable, but when Steve Jobs, Apple’s mythological CEO died in 2011, investors were also skeptical. Ten years later, the iPhone maker is worth 10 times its previous value. Microsoft has increased its value 15-fold since Bill Gates stepped down as CEO in 2000. Even Bezos recently announced that he’s stepping down as Amazon’s CEO.

Musk isn’t a king nor a prophet. He is sometimes wrong. Very much human. While there is no doubt that he is an exceptional entrepreneur, he is as replaceable as any one of us. It’s about time for Tesla’s board to remind him of this fact.

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