Don’t give currency to cryptic Elon’s tweets
It ’ s possible we ’ re overinterpreting Elon Musk ’ s tweets. That’s not an easy thing to write given that, on some level, I’m supposed to dissect and study their entrails like tiny birds. Sometimes, though, you just have to put down the wee scalpel and tweezers, wipe off your hands and consider things in their totality.
The tweet, for instance, that landed like a blue-checkmarked hand grenade last week, is perhaps less important for what it might say about the Tesla CEO’s particular thoughts on cryptocurrency or the environment. It is perhaps more useful when considered as merely one more little uniform tile in the mosaic provisionally titled “Elon Musk just says a lot of stuff on Twitter”.
A quick recap of some recent events:
● January 2021: Tesla discloses in its annual report filed with the US Securities and Exchange Commission that it bought $1.5bn worth of bitcoin.
● March 2021: Tesla begins accepting bitcoin as payment for its vehicles in the US.
● April 2021: Cathie Wood’s ARK Investment Management, a big fan of Tesla, releases a white paper positing bitcoin actually promotes renewable energy, an argument that might charitably be described as counterintuitive. Musk appears to endorse this (hard to otherwise interpret a tweet saying “True”).
● May 2021: Tesla discloses about a fifth of its pretax profit in the first quarter came from selling bitcoin; done, Musk tweets, to “prove liquidity”.
Off the bat, it looks like the whole liquidity-proof thing is somewhat moot now that Tesla will apparently neither be accepting the stuff nor selling it. Still, with our mosaic in mind, perhaps we might question the veracity of that earlier statement: who pumps $1.5bn into something and then tries to test whether it will trade? Which naturally leads to: who pumps $1.5bn into something with a well-known coal addiction, promotes dubious research about its green credentials, and then realises it might pose a problem with the environmental, social, and governance crowd? This feels more Ringmaster of Coin than Technoking.
There are other instances of Musk’s tweets occupying an alternate reality or switching realities at bewildering speed. “Funding secured” is the most infamous example, but my colleague Craig Trudell at Bloomberg News has rounded up many of the highlights.
So, yes, it’s possible to pick apart the tweet in any number of ways. Why did Musk do this now? How does it dovetail with his apparent fascination for dogecoin? Does “will not be selling” mean Tesla already sold a chunk of its stash? Does this have any accounting effect? Might other cryptocurrencies somehow tied to windmills or what-have-you be about to displace bitcoin? And so on.
Really, though, the best response to all this might be a piece that merely repeats the phrase “Why not just build cars?” in the style of that manuscript by Jack Nicholson’s character in The Shining.
I view the bitcoin thing primarily as just a subplot of Tesla’s bigger, long-running governance drama. I also think the company will be tempted to sell bitcoin as it sees fit to top up earnings, provided the price stays up.
Tesla was sitting on a net paper gain of almost $1bn at end-March. This quarter’s earnings already may face pressure from a slower-thanexpected rebound in production of more expensive Models S and X and rising prices for just about everything that goes into building an electric vehicle. Then there are the recent problems in China, which may be affecting sales in Tesla’s main growth market. And while Tesla still trades at 163 times forward earnings, it has lost almost $300bn since its January peak.
Beyond whatever happens this quarter, the underlying premise of bitcoin being a cash equivalent itself looks bogus. After all, if this is a currency, then it’s a little odd to keep hearing about its “market cap”.
See? Even now I couldn’t help myself. But really, just try not to think about it too much.