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The Free Speech Gambit: What Elon Musk’s Twitter Moves Will Mean for Investors
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During his victory lap earlier this week after reaching an agreement to acquire social media giant Twitter, Tesla CEO Elon Musk took a less than subtle jab at some of the platform’s practices by claiming that “Free speech is the bedrock of a functioning democracy.”
Musk positions himself as a free speech absolutist which certainly ingratiates himself with certain elements of the free speech absolutist crowd. However, their convenient and glaring omission is which voices that platforms like Twitter are most likely to restrict and why.
Free speech forums seem too often to devolve into venues full of bullying, misinformation, and hate speech as Donald Trump, Marjorie Taylor Greene, and even Musk himself, have highlighted. However entertaining the philosophical, political, and legal arguments about free speech and how Musk will balance them are, investors are far more concerned about how his Twitter focus will affect their portfolios.
Tesla’s stock price has already dropped an improbable 30% since November, and has lost more than 10% since Monday. Therefore, Musk being ‘distracted’ by Twitter probably doesn’t bode well for Tesla investors. Regrettably for Tesla investors, Musk still seems likely to be highly distracted in the short term.
As Clare Duffy points out in her article for CNN, major changes are likely coming to Twitter’s board. Musk’s offer letter included a statement of no confidence in the board. That unnecessary inclusion led Duffy and other analysts to assume that Musk’s personal involvement in selecting new management will be significant. However, if the past is prologue, trying to predict Musk’s exact next actions is anyone’s guess.
Still, the uncertainty surrounding how Musk will juggle all of his responsibilities won’t be bad news for all investors. Investors in Jeff Bezos’ Blue Origin, which has long trailed Musk’s SpaceX, have already begun cutting into the latter’s advantage. Last month, after losing out on an important multibillion dollar NASA contract to SpaceX for a lunar lander, NASA reversed course and Blue Origin will also produce a lunar lander for manned flights to the moon tentatively scheduled for 2026-27.
For most investors like you, opportunities to capitalize on this Musk effect will most likely come in the public electric vehicle (EV) sector. Tesla currently crushes the field with a 75% market share of EVs sold during the first three months of 2022, and Tesla’s sales figure to grow exponentially over the coming years. However, its market share dominance seems likely to end in the next few years.
Tesla should continue to dominate its ‘pure’ EV rivals, such as the promising upstarts Rivian, NIO, and Xpeng for years to come. However, legacy auto manufacturers such as Ford and General Motors (GM) have positioned themselves to be able to quickly surpass Tesla in total sales and market share.
Ford and GM each dwarf Tesla in total car sales currently, hinting at a potentially significant advantage in overall production capabilities. However, the successful production of these traditional cars does not automatically guarantee EV production success as auto manufacturers and investors are realizing now. Therefore, traditional car companies like Ford and GM are spending billions of dollars to tap into their production and customer advantages to make the transition a smoother one.
Early returns signal that this strategy has had some success. For example, Ford has had to stop taking orders for its top EVs (Mustang, F-150) due to their demand dwarfing current production capacity. Incredibly Ford’s F-150 Lightning sold out before they even went into production. In another feather in Ford’s cap, they will beat Tesla to market with an electric truck.
GM already has an EV Hummer on the market, and its connection to the military should provide a boost to its sales and future industry positioning. Additionally, GM’s Corvette is set to make its impressive debut in 2023. The future seems incredibly bright for legacy automakers and their investors as they continue to ride the EV momentum.
Despite these strong prospects many analysts view legacy car stocks as significantly underpriced. Some analysts are currently forecasting that GM’s stock will grow by 25% and Ford’s by 40% before the end of 2023. Some moonshot minded analysts believe that GM’s stock could reach Tesla-like valuations.
However, those beliefs are based on a lot of simultaneous ifs, such as:
If GM spins off their EV business, and
If GM could create a Ford like excitement and demands for their EVs, and
If GM EV spinoff results in skyrocketing stock prices, and
IF GM’s management could sustain high stock prices like Tesla
Devin Booker of the Phoenix Suns hilariously points out the reliance on ifs. However, as Musk and Tesla notably showed the world, analysts’ limits on stock prices are usually wrong. Savvy investors just need to be patient and wait, and then reap the rewards.
Speaking of being patient and waiting, the world can only sit and wait to see how Musk handles this new Twitterverse fueled drama. He will almost certainly have some head scratching WTF moments, but there will also be moments where he reminds us all of his brilliance and ingenuity. No matter how we might label these moments, we can agree that they probably won’t be boring.
Buckle up and enjoy the ride!
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