The phrase “Twitter overhang” was inescapable among Elon Musk’s biggest fans on the social media platform he began chasing seven months ago.
Tesla stock went haywire after Musk took a stake in Twitter, agreed to buy it, and then tried to get out of the deal. Bulls theorized that the stock would recover once the saga was over. Some even celebrated when the deal closed last week by selling merch with the words “Twitter Overhang Lifted” and an arrow pointing to the moon.
So much for that.
Tesla stocks didn’t react much after Musk landed the takeover and took a hit along with much of the market on Wednesday, when Federal Reserve Chairman Jerome Powell said the central bank will continue to raise interest rates to tame inflation. The stock is now trading lower than it was when the Twitter deal was closed, and monetary policy may be the least of the automaker’s concerns in the coming months.
It has long been the case that Tesla is heavily reliant on Musk on the one hand and has had to share its chief executive officer with its various other companies on the other. “While Mr. Musk spends a lot of time at Tesla and is very active in our management, he does not devote his full time and attention to Tesla,” the company says in quarterly filings.
Now that Technoking is also Chief Twit, he leads five companies: Tesla, SpaceX, Twitter, Neuralink and The Boring Company. And anyone who thought Musk would draw clear lines between his newest venture and his most valuable hasn’t been paying attention.
Before Musk officially closed his deal, it began to sink in that Twitter’s problems had become, at least to some extent, Tesla’s problems. Bloomberg was the first to report that Musk had asked some of the automaker’s engineers to meet with product leaders at the social media company’s headquarters in San Francisco and review the code.
According to CNBC, dozens of the more than 50 Tesla employees sent to Twitter have been uprooted from Tesla’s Autopilot team. That group is familiar with being under attack for failing to realize their leader’s self-directed vision. It emerged last week that statements made by the company about its technology are under investigation by the United States Department of Justice and the Securities and Exchange Commission.
Even if the Tesla engineers’ detour is short-lived, there are other ways Twitter can continue to trail the electric vehicle leader. The company recently disrupted three China-based operations that covertly attempted to use the service to influence US politics in the months leading up to the midterm elections, the Washington Post reported this week.
Tesla is now caught between a rock and a hard place, with possible backlash from China if Twitter continues to thwart these kinds of influence campaigns, or from the US if it doesn’t.
And Tesla has an awful lot at stake: its Shanghai factory has quickly become the most productive and most important in the world, with a stated capacity to make more than 750,000 vehicles per year. The company gets nearly a quarter of its revenue from China — more than $5.1 billion in the past quarter. Musk’s reliance on the Chinese Communist Party was already a concern in Washington, and lawmakers’ scruples will only be exacerbated by his ownership of Twitter.
When Alex Stamos, the former chief security officer of Facebook, posited last week that Musk had made “a big mistake”, he mentioned exactly these risks.
“The people who should be really mad are shareholders of $TSLA,” Stamos tweeted. “The company they partially own has now become the main hostage for countries looking to control the future of online speech.”
If major shareholders are upset, they are not yet public about it, although that could change. Tesla has given investors until December 22 to submit proposals for inclusion in the next proxy statement. The company has scheduled its annual meeting for May 16.