The power of social media to do bad as well as good, is increasingly obvious from the “celebrity” authors taking to the powerful tools available.
The latest, Tesla Inc chairman Elon Musk is a good example. Last week, he chose to tweet that he was mulling taking the company private. That led to a 11 percent surge in the Nasdaq-listed company’s share price and wrong-footed traders and investors alike.
It has since led some investors to sue the electric car pioneer. There is also now a regulatory probe of Tesla by the SEC to see if rules were broken and what damage it may have caused.
Not only did the tweet manage to hurt short-sellers who normally profit on a share price flop, but it also led to investors feeling orphaned by a company until now happy to take their money in return for making them rich from development capital one day in the future.
But it goes deeper. Musk appeared to mull the idea, weigh it up. To that extent, he was using Twitter correctly: as a platform for sounding off feelings. Or was he?
When you are the chief of a large and closely-watched stock like Tesla, you have to be more careful. Especially, since days earlier he had to eat humble pie when he insulted an analyst for a “boneheaded” question and later apologised. Yes protocols must be observed for any public company.
But therein is the point. As the SEC approached Tesla to confirm whether the tweet was factual – was Musk serious about going private and having already secured the funding – so too investors were left blinded by the sudden announcement and unclear message.
And what is more, a 1,100-word blog from Musk on Monday evidenced that he had in fact been talking to the Saudi Arabian sovereign wealth fund for months to secure funding, which he declared he now has done. So it wasn’t a feeling or a muse, it was a declaration that he has acted to take the company private and was now making it public in a tweet having just spoken with his board about his ambitions before his post.
The correct procedure would have been to communicate his position and that of the company via a platform where everyone can see it. Sorry, but for all the millions who follow Musk, Twitter is not the right platform at all.
The regulatory news service for the US jurisdiction would have been the right place, where traders and investors could all see the news real-time and same time.
Being listed on the New York Stock Exchange means your first duty is in fact to that audience. By tweeting it first, it also becomes selective disclosure, which is an offence under US securities law, and most other jurisdictions around the world for that matter.
Bizarrely, the SEC saying they are relaxed that Twitter is used to communicate so long as the investors are told, is rather lame too.
There will always be a time when investors do not have access to Twitter, and many banks do not allow it on trading floors etc.
By reporting it to the regulatory news service, then posting it to the Tesla investors relations website and only then tweeting a link to that announcement, Musk could have avoided all the backlash.
In some ways, Musk has displayed all of the shortcomings of the incumbent US President Donald Trump. The head of state is also a fan of Twitter and tends to conduct his foreign policy, trading remarks, replies and often outbursts and insults on the micro-blogging website.
Those with huge Twitter audiences, alas, often lose sight of the social media’s purpose and the responsibilities. Company news and foreign policy should never be played in public as it can endanger lives and livelihoods.
So it is ironic, that for Musk, who wanted to put a lid on analyst intrusion in the company should go about declaring that in such a public medium. What is more, going private means months of scrutiny by the Saudis and is hardly what he wanted. Poor judgement.
george social media 