Bird Bath

If I were a Tesla shareholder (and we all are in index funds), I wouldn’t necessarily be enamored with the amount of time Elon Musk appears to be dedicating to Twitter.

To be fair, Musk is a multitasker extraordinaire. He makes cars, yes, but he also builds spaceships, and when he’s not doing either of those things, he digs tunnels, designs humanoid robots and pokes around in the brains of monkeys, only one of whom had to be euthanized.

All of those ventures have been “successful,” depending on your definition of success, and on the surface anyway, running a social media platform should be easier than sending people to Mars and revolutionizing the car. Only you could argue it’s not. The social media business is littered with pitfalls and land mines. Nefarious state actors are constantly engaged in efforts to influence democratic elections, mass shooters have sometimes used social media to live-stream violence, social media bullying has been linked to teen depression and suicide, trolls are everywhere, it’s impossible to determine who’s a bot and who’s real and lawmakers all around the world want a say in how platforms conduct their businesses. At the same time, the businesses depend heavily on advertising, which is cyclical. And, in an era when corporations are increasingly prone to siding with left-leaning causes for fear of alienating consumers, advertising dollars can disappear overnight in the event platforms are insufficiently attentive to hate speech and misinformation.

Musk knows most of that very well. He’s especially attuned to the bot problem. After all, he tried to use it as an excuse to walk away from the Twitter deal. And he’s recently discovered just how quickly advertisers will hit the exits if they suspect platforms are headed in the “wrong” direction.

Musk’s complaints about lost ad revenue omit a crucial point: Republicans, like Musk now claims to be, have a long history of equating corporate money with free speech. If spending is free speech, then so is choosing not to spend. So, when Musk claims, as he did last week, that corporations who paused advertising campaigns on Twitter following his acquisition of the company are “trying to destroy free speech in America,” he has it backwards. It’s Musk who’s trying to destroy free speech in America by tacitly suggesting that corporations have no right to stop spending, when in fact, the act of pausing advertising is a manifestation of free speech.

Tesla shareholders would be forgiven for suggesting that, at the least, this is all very distracting. But it goes beyond that. There are all manner of questions swirling around the financing for the Twitter deal, which was cobbled together prior to escalating market turmoil which stranded billions in LBO debt on bank balance sheets. The banks in Musks’s Twitter consortium are now in a suboptimal position: They have some $13 billion in financing (figure below) they’d ideally like to offload, but can’t. Or, if they can, it’d likely be at a loss.

This could, depending on how things develop, count among the largest hung deals in history. For context, banks’ backlog was almost a quarter trillion in 2008. Currently, it’s estimated at $40 billion including the Twitter financing.

It’s with all of that in mind that I felt compelled to highlight Musk’s decision to sell another ~$4 billion in Tesla stock, the first dispositions since August. Tuesday evening filings show Musk unloaded almost 20 million shares. There was no indication the sales were planned ahead of time. Musk has sold more than $35 billion in stock over the past year.

In August, he claimed he was done selling. “In the (hopefully unlikely) event that Twitter forces this deal to close and some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” he told a Twitter follower, whose tweets are now protected.

Earlier this week, Berkshire overtook Tesla in market cap for only the second time since summer 2021. Tesla is down 53% from the highs hit late last year.

As Bloomberg dryly noted Wednesday, “several high-profile individuals promised to invest some $7 billion, though it isn’t known whether all of them stuck to their pledges [a]nd Musk has never said publicly how he planned to gather his share of the cash needed to close the deal.”

By his own account, Twitter is losing millions of dollars per day (tweet below).

Regarding Twitter’s reduction in force, unfortunately there is no choice when the company is losing over $4M/day.

Everyone exited was offered 3 months of severance, which is 50% more than legally required.

— Elon Musk (@elonmusk) November 4, 2022

So far anyway, Musk appears to be taking a (bird) bath on the deal, much like some observers believe Wall Street would if they attempted to sell their Twitter debt commitments in the current environment.

According to figures cited by MIT, Twitter might’ve lost more than a million users since Musk took the reins. But Musk, true to Trumpian form, claims usage is in fact at an all-time high. “I just hope the servers don’t melt!” he exclaimed, in a characteristically hyperbolic tweet.

Adam Blacker, director of content at research firm Apptopia, told Insider that average daily downloads of Twitter and daily average usage have in fact skyrocketed since Musk took over. Blacker had a simple explanation: “It’s like a car accident on the highway. People like to stop and watch.”