The Industry

Blue Bird vs. Cash Cow

Elon Musk’s Twitter purchase has become a big problem for Tesla.

Elon Musk seen in the back seat of a black car.
Not going great. Oliver Contreras/Getty Images

From the start, Elon Musk’s flirtation with Twitter was bad for Tesla. The stock of Musk’s electric car company dropped instantly on the news in April that Musk was buying the social media company, for reasons both obvious and theoretical. Every minute spent running one company is a minute spent not focusing on the other. China could use Tesla’s reliance on the country’s market and manufacturing to pressure Musk over his management of Twitter. Or, maybe, Musk’s purchase of Twitter for $44 billion, with $13 billion of that in bank debt, could result in him selling lots of Tesla shares and depressing their price as he did. Musk initially planned to use Tesla stock as collateral to secure Twitter financing from his bank, leaving open the possibility that the banks would sell that stock, and lower its price, if Musk didn’t meet his obligations. He dropped that plan before closing the deal, but a version of it may now be back in play.

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Tesla’s stock price is down about 61 percent so far this year, far, far worse than the country’s major stock indices. It has kept falling hard this week, and now we know another reason why: As revealed in a filing with the Securities and Exchange Commission, Musk sold 22 million shares worth $3.6 billion between Tuesday and Thursday. By Bloomberg’s calculation, Musk has now offloaded $40 billion of Tesla stock since late 2021. When Musk sells Tesla, he does it in such large numbers that the price moves considerably downward, unlike the tiny fraction of a cent that the price moves when a regular person buys or sells Tesla. Musk’s Tesla sales, among other variables, hurt the price of the stock. He started selling on Tuesday at $168.06 and finished on Thursday at $161.52.

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The public does not know much about Musk’s finances beyond how many Tesla shares he still owns. That’s about 424 million shares worth something like $67 billion, about half what his slightly larger stake was worth in August. In the intervening period, he spent about $27 billion of his own money on the Twitter deal, taking on debt whose interest payments will represent a huge chunk of what Twitter makes in a good year. Twitter is no longer a public company subject to public financial disclosures, but the human brain naturally puts some dots together: Musk cannot cover Twitter’s needs with Tesla stock but can with cash, and he has turned lots of Tesla stock into cash at the expense of Tesla’s stock price. The talking-head class is angry on behalf of Tesla shareholders, who have seen the value of their shares plummet. There’s lot of this:

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If you think Musk’s ownership of Twitter has been a bad thing for the platform, the public discourse, or merely your own sanity while scrolling, then Tesla offers a glimmer of hope. Tesla is by far the biggest source of Musk’s huge net worth, and he is approaching a full year of his entanglement with Twitter being bad for his golden goose. Musk bought Twitter because Twitter’s lawyers forced him to, but he got into the mess in the first place because he wanted to dictate how things worked on a platform he loves using. By the time the deal closed, he’d been talking about it much more in business terms than in fake “free speech” parlance. And while he’s given his conservative fans some silly treats, the biggest thing he’s done so far at Twitter is try to spend less cash, both via layoffs and simply not paying its bills. Musk seems preoccupied with not losing so much money at Twitter, although some of the things he’s done have probably already cost Twitter a lot of money. So, shouldn’t he care even more about not losing wealth at Tesla, where a much, much, much higher portion of his empire is at stake?

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Maybe this balancing act will result in Musk returning his new toy to the store at what would surely be a big loss, and pivoting back toward the company that makes him rich. But it could also cut in a different direction and make Twitter even more subject to Musk’s whims than it is now (which, to emphasize, is a state of being extremely subject to Musk’s whims). At a 30,000-foot level, it could go three ways.

Door 1 is that the status quo holds. Musk does not seem to need a lot of sleep, and he could keep running all of his companies to the satisfaction of anyone (specifically, any board of directors) who might stop him. Tesla shareholders have been pretty pissed at Musk before. Some of them are suing him right now, actually, over his generous Tesla compensation. Few people know more about getting dragged to court by their own shareholders than Musk does. And yet he has maintained his job as Tesla CEO, time and again. It has helped him that he is a good marketer with an entire cult of personality around him, which sent Tesla’s stock on a rocket ship ride until the party stopped this year. Maybe Twitter can serve enough ads telling people to buy Tesla stock that Musk’s Twitter will even become a good thing for Tesla. It seems hard to run Tesla while spending part of every day banning accounts that annoy him, playing footsie with QAnon, and devising excuses for getting booed at comedy shows. Musk is at heart a poster, not a car CEO, but he has still helped Tesla’s stock go up over many years. He still controls a lot of hearts and minds.

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Door 2 posits that Musk cares mainly about money, so he gets himself out of a Twitter experiment he didn’t want to get caught up in anyway. In this version of the future, Tesla shareholders remain furious enough that Tesla’s board of directors gives Musk an ultimatum: Step back from the day-to-day management of Twitter (or even sell Twitter), or relinquish the CEO job at Tesla. Musk is not a controlling shareholder of Tesla, although the board has sometimes acted like he is, and he has enough clout to make himself a hard man to oppose. Perhaps things could get dire enough for the stock price that Musk’s fellow directors force him to make a choice. That’s still fan fiction at this point, but maybe that changes. Musk doesn’t run Tesla in quite the same way Mark Zuckerberg runs Meta, much less the way Musk himself now rules Twitter.

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Door 3, if you find Musk unappealing and just want to tweet in peace, is the bad door. Imagine that Musk is forced to pick between Tesla and Twitter, but he decides he has enough money as is, cashes out whatever he must from his Tesla stake, and decides to pour himself even further into Twitter (and his several other companies). This would be a bad financial decision and could knock him out of the ranks of the mega-richest mega-rich people, but it would preserve his ability to press buttons and give orders on his favorite website every day of his life. Somehow Twitter, which is now all about Musk at all times, could become even more about him.

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Yes, of course: It’s possible that Musk is selling huge numbers of Tesla shares for reasons entirely unrelated to his newfound responsibility for the notoriously money-losing business he just took out more than $10 billion in debt to buy and then laid off thousands of employees from and stopped paying bills for within weeks of taking over. That could be the case. Maybe what is happening is more innocent, and Musk is just offloading Tesla stock because he thinks it is overvalued at the same time he tells Tesla shareholders on Twitter how great things are looking long-term. Maybe Musk is playing three-dimensional chess not just in his management of his portfolio, but in everything he says about his companies. Maybe tech journalist Kara Swisher is right, and Musk is acting like a right-wing edgelord not because he actually believes what he says, but because he has a bigger plan for what Twitter will soon become: “a new kind of media company.” Or maybe not. Maybe Musk is just redpilled, and his actions at the crossroads of Tesla and Twitter are exactly what countless people had been warning they would be for months.

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Earlier this month, Musk addressed the idea that he has not paid enough attention to Tesla, a public company with shareholders he is nominally supposed to be protecting. “I continue to oversee both Tesla & SpaceX, but the teams there are so good that often little is needed from me,” Musk said, not quite dismissing the idea that he hasn’t been attentive to his non-Twitter businesses of late.

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Naturally, the first reply visible underneath it is from a Twitter account with a few dozen followers whose handle is “Nick” followed by an unintelligible string of letters and numbers, plus a Twitter Blue subscription with a blue checkmark.

“That’s the mark of a great leader,” Nick tells the man who owns Twitter. “When you’re [sic] team can continue the mission without or atleast [sic] minimal course correction.”

Musk could spend the rest of his career sitting atop a public company that makes him tons of money but which might at some point require him to meaningfully report to other people. Or he could spend his time with less money, talking to people who worship him in a place he can remake in his own image. How much is it worth to play god in your own sandbox? Sooner or later, we may get a hard number.

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