Musk Waffles

Is Elon Musk fit to be CEO of a public company?

This is an uncharacteristically short post, triggered by Elon Musk’s latest ill-considered tweet regarding his agreed (but not consummated) merger deal with Twitter. Early this morning, Musk tweeted that the Twitter deal was “on hold” pending clarification of some subscriber numbers recently reported by Twitter. This one tweet caused Twitter shares to fall 20% in pre-market trading, before Musk posted a subsequent tweet saying that he remained “committed” to the deal. (The stock opened down 10% or so this morning, despite the clarification.)

Keep in mind here that Musk does not have a due diligence “out” in the merger agreement and so it is far from clear on what legal basis Musk might have plausibly claimed that the deal was “on hold” (without consulting with his merger counter-party or his lawyers by the way).

But legal niceties have never been of particular concern to Musk of course. Recall his 2018 tweet re the possibility of taking Tesla private at a big premium to the then market price ($420 per share….funding secured”). Recall also some of Musk’s various crypto tweets, not only those regarding the merits of crypto itself (even Dogecoin) but also those regarding Tesla’s decision to accept (and then not to accept) crypto as payment for new Tesla vehicles, all of which impacted the market trading price of various crypto assets and possibly Tesla itself (I don’t recall). In a court of law, these tweets might be introduced into evidence to support charges of market manipulation, but in the parallel universe called Musk World we all just say “Oh that’s just Elon being Elon. Doesn’t he keep things interesting?”

I have no idea what Musk has in mind for Twitter, and I am not sure if Elon does either. I have been personally skeptical about this deal from the very beginning, and my concerns have apparently been shared to some extent by the merger arbs. This skepticism was reflected in a large (albeit recently declining) gap between Twitter’s share price and the agreed merger price, at least before this morning’s tweet. And I have never thought that a $1bn break-up fee alone would prevent Musk from backing out of the merger or more likely attempting to renegotiate price, either of which may still be in the cards.

But this latest Musk move really seems to be over the top, even for the Dogefather. And so I have to ask, only a bit rhetorically: Is Elon Musk suited to be a public company CEO?

Assuming he completes the merger, Twitter will be a private (not publicly traded) company and Musk is unlikely to become CEO. Musk is CEO and Chairman of SpaceX, but it too is a private company. However Tesla is a public company (a big one) and Elon Musk is still the CEO. Musk was also the Chairman of Tesla before his “going private” tweet, but he was forced to give up that role as part of his settlement of security fraud charges with the SEC. But should he remain CEO?

I know, I know. Musk is a brilliant industrialist, the Thomas Edison of our age. And Tesla has been hugely successful commercially and has made its investors a lot of money along the way (until recently). But being brilliant and financially successful doesn’t necessarily qualify one to be a public company CEO. In fact, I would argue (with absolutely no empirical evidence) that these traits may in fact be inversely correlated. But that isn’t really my point either.

My point is this: Elon Musk has repeatedly demonstrated not just disregard but overt disrespect for the rules and laws governing public companies. He has also repeatedly exhibited careless disregard for the impact of his erratic personal and public behavior on investors, including on his own shareholders, behavior that on the part of almost any other human being on earth would have cost him (or her) their public company CEO job.

And yet I don’t see the Tesla board firing Musk anytime soon, nor would I support such a move were I on the Tesla board. But I do think the the Tesla board should resist any temptation to reappoint Musk as Chairman when the SEC settlement agreement lapses. If Musk’s going private and crypto tweets were not enough to convince them of this, then his latest Twitter tweet should do the trick. At least in my book.

I have no doubt that there will be more fireworks to come with respect to the Twitter deal, so watch the news flow. After all, this is Musk World we are talking about.

Links:

Musk Says Twitter Deal is On Hold, WSJ 5.13.22