(On most days have not even one theme song, but today we have two:
“Heard It On the X” – ZZ Top
“Cult of Personality” – Living Colour)
Like many, I tuned into Elon Musk’s interview at the New York Times Dealbook conference. Also, like many, I was stunned by what I heard. As I noted to an acquaintance at the time,
I tuned in for the Cybertruck hype and a mea culpa and stayed for the psychoanalysis and extraterrestrial musings.
But the “highlight,” as it were, came as part of a discussion about advertiser boycotts on X. I was stunned when I heard it the first time, even more when he paused for effect and slowly repeated it for emphasis. Consider me old-fashioned, but I’ve never thought that being completely dismissive of, if not hostile to, your customers is a great way to impress them. But it’s quite clear that Elon Musk can and does play by a different set of rules than anyone else. To be sure, it’s worked quite well for him.
I’ve frequently referred to Tesla (TSLA) as a “faith-based stock.” Our explanation from October 2020 still applies:
By conventional measures such as P/E ratios, the stock’s valuation borders on insane. But investors who focused on the company’s technology and future prospects have been richly rewarded. They have seemingly unshakeable faith in Elon Musk and his ability to deliver groundbreaking technology. Why change tactics when faith is working so well, they might ask?
TSLA rallied about 250% in the year following that piece, and although it had a rocky ride since its $414 high in November 2021, it is still up over 60% in the three years since we wrote that. Longer-term shareholders may indeed be up 5X, 10X or more. Their faith paid off immensely.
By this point, Musk’s unconventionality is a feature, not a bug. No other CEO could come away from an interview of that sort with his stock relatively unscathed. (TSLA is down -1.8% as I type this.) Imagine if Jaime Dimon or Bob Iger, for example, spoke wistfully about colonizing other planets, offered psychological musings about their childhoods, and spent the better part of an hour discussing their foibles on social media, while barely discussing a widely anticipated new product launch. How much lower would another CEO’s stock be on the following day?
For that matter, could one suggest that any other CEO engaged in publicly outlandish behavior to distract from the launch of a controversial product? Not everyone is in love with the Cybertruck, yet very few of us are discussing it today.
Yet no other major company CEO is also the CEO of a rocket company (SpaceX) and the primary owner of a social media company (X). Extraterrestrial adventures and social media misadventures are part of Musk’s bailiwick. No other public company CEO could get away with running so many other significant businesses, all of which are privately held, without having their stock severely punished.
It would be fascinating to see how the valuation of X might react to such a profound dismissal of its largest customers, but it has neither publicly traded stock nor post-takeover bonds. In a comment to a different acquaintance, I wrote:
Stunning. The X bond holders have to be freaking out even more than they were already.
It is believed that Morgan Stanley (MS) holds the bulk of the bonds used to finance Musk’s acquisition of Twitter, yet its stock is modestly higher (+0.8%) on the day. MS investors certainly don’t seem too nervous about the most recent developments.
Let’s face it – Elon Musk did not become the world’s richest person by doing things in a conventional manner. And for that, he has been granted unique leeway to do and say more or less whatever he wants. If you make a lot of other people rich, it is quite sensible for those folks to approve of your methods – no matter how outlandish they seem. In Musk’s career so far, he’s earned the ability to do and say what he wants, no matter how outlandish or controversial. The faithful are keeping the faith. The question going forward is whether the multitude of other shareholders remain quite as faithful.
Disclosure: Interactive Brokers
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