Prepared by A.J.Nikitins and V. Palens
Elon Musk. It is safe to say that everyone including their grandparents has at least heard the name of the eccentric protagonist of this article. Achieving fame from his revolutionary electric automobile and space transportation ventures, Musk is also known for his presence on Twitter, where he has attained a cult-like following. Some might say that it has become a bit too much like a cult. A large and ferocious following can easily lead to disaster. That is why Musk’s activities on Twitter have been marked by few and minor cases of significant effects on financial markets, to the detriment of regulatory institutions and investors alike. While many of them were related to his EV company Tesla, some tweets have impacted the stock prices of other companies and recently even cryptocurrencies.
Haha electric car go bzzzzz
A shining example of what Musk can do is the “Tesla stock price too high imo” tweet posted on May 1, 2020, (Musk, 2020b). It might seem weird for a CEO to write about the overvaluation of a stock’s price, but, well, he got what he wanted. Investors and traders agreed with his sentiment, and Tesla’s stock price fell by 10% (Peters, 2020). Combined with Tesla’s already skyrocketing market cap, this drop amounted to roughly $14bn (Hotten, 2020). While from the side this situation appeared quite silly, investors felt the heat, with some pushing for a lawsuit against Elon, as this had not been the first time Musk had done something like this (Canellis, 2021).
Nearly three years ago on August 7, 2018, when the stock value was 10 times less than it is now, Musk made a peculiar tweet: “Am considering taking Tesla private at $420. Funding secured.” (Musk, 2018) With the claim that Tesla will soon go private, the stock price shot up by 13% (Stempel, 2020). While this tweet could be chalked up to Musk just being a bit insane, the motive could have been an attack on short sellers. Due to the jump in the price of Tesla stock, they experienced losses of around $1.3bn (Kim & Picker, 2018). Whatever the reasons might have been, this tweet was not liked by regulators. The SEC slapped a $40 million fine on Tesla and Musk, as well as demanded that Musk be removed as chairman (Stempel, 2020).
It is clear that Elon’s personality and Twitter-based outbursts have the power (if only in the short run) to spur some financial shenanigans.
What the f* is a Signal™?
As it would be, Tesla’s stock has not been the only thing affected by Elon’s tweets. On January 7, 2021, Elon tweeted, “Use signal” (Musk, 2021). What Elon referred to was Signal – a rapidly growing messaging app (Signal, n.d.). At the end of 2020, this app had 20 million active users; after Elon’s tweet, the number of users in January 2021 had doubled to 40 million. By now, you would have guessed that Signal’s stock had hiked during this period, and… you would be wrong. The company that owns the Signal app, Signal Foundation, is not publicly traded (Curry, 2021). It is a non-profit organization. What actually ended up happening was the skyrocketing of a penny stock called SIGL (Signal Advance Inc). The stock price of SIGL spiked up within two days by 6450% from $0.60 to $38.70. Signal Advance Inc offers medical devices for complicated medical examinations and has absolutely nothing to do with the Signal app (Signal Advance, 2015). However, this stock is the first thing that pops up when you search “Signal stock” on Google and, therefore, people with FOMO did not even think twice before buying the stock that Musk had supposedly recommended in his tweet.
SPY TSLA GME DOGE TO THE MOON!!!
Another excellent example of an influencer’s power on markets is Elon’s tweet on December 20,2 020. He simply wrote, “One word: Doge” (Musk, 2020a). This tweet sent up Dogecoin’s value by 20% in only a single day. This was not the last of Musk’s influence on Dogecoin. Just last Saturday, May 8, 2021, Musk’s appearance on Saturday Night Live with a few mentions of the coin throughout the show led to its price dropping by 29% to as low as $0.45 (Sigalos, 2021). It is insane to think that a coin whose value had grown by 15 000% this year alone could have lost a third of the gains just because of a single Musk’s appearance on live television.
It is safe to say that the cult of Musk will continue to follow his tweets as gospel for the time being. With lawsuits yet to lead to any ultimate restrictions on his access to the platform, Musk’s propensity to post bizarre and controversial tweets will continue unrestricted. With effects all across the financial markets from his own companies to more volatile and risky cryptocurrencies, Musk might be the precursor to an era of financial influencers. Just like influencers on Instagram give recommendations on everything from lifestyles to makeup, celebrities, like Elon Musk, could use their popularity to sway the increasingly retailised financial markets.
Canellis, D. (2021, May 06). Judge rules Musk’s ‘Tesla stock too High imo’ TWEET troublesome, but not enough to sue. Retrieved May 16, 2021, from https://thenextweb.com/news/elon-musk-tesla-shareholders-lawsuit-tweets-sec-settlement-on-hold
Curry, D. (2021). Signal revenue & usage Statistics. Retrieved May 16, 2021, from https://www.businessofapps.com/data/signal-statistics/
Hotten, R. (2020, May 01). Elon Musk tweet wipes $14bn off Tesla’s value. Retrieved May 16, 2021, from https://www.bbc.com/news/business-52504187
Imgflip. (n.d.). Elon Musk Laughing Template [Image]. Retrieved May 16, 2021, from https://imgflip.com/memetemplate/179274201/Elon-Musk-Laughing
Kim, T., & Picker, L. (2018, August 08). Elon Musk’s tweet about going private costs Tesla short SELLERS $1.3 billion. Retrieved May 16, 2021, from https://www.cnbc.com/2018/08/07/elon-musks-tweet-about-going-private-costs-tesla-short-sellers-more-t.html
Musk, E. (2018, August 07). Am considering taking TESLA private at $420. FUNDING SECURED. Retrieved May 16, 2021, from https://twitter.com/elonmusk/status/1026872652290379776
Musk, E. (2020a). One word: Doge. Retrieved May 16, 2021, from https://twitter.com/elonmusk/status/1340590280848908288
Musk, E. (2020b). Tesla stock price is too high imo. Retrieved May 15, 2021, from https://twitter.com/elonmusk/status/1256239815256797184
Musk, E. (2021). Use Signal. Retrieved May 16, 2021, from https://twitter.com/elonmusk/status/1347165127036977153
Peters, J. (2020, May 01). Elon Musk says Tesla’s stock price is too high, and now it has fallen. Retrieved May 16, 2021, from https://www.theverge.com/2020/5/1/21244136/elon-musk-tesla-stock-price-too-high-fall-tweet
Sigalos, M. (2021). Dogecoin plunges nearly 30% during Elon Musk’s SNL appearance. Retrieved May 16, 2021, from https://www.cnbc.com/2021/05/08/dogecoin-price-plummets-as-elon-musk-hosts-saturday-night-live-.html
Signal Advance. (2015). The future begins now. Retrieved May 16, 2021, from Signaladvance.com website: https://www.signaladvance.com/
Signal. (n.d.). Speak freely. Retrieved May 16, 2021, from https://signal.org/
Stempel, J. (2020, April 15). Tesla, Musk must face shareholder lawsuit Over going-private tweet. Retrieved May 16, 2021, from https://www.reuters.com/article/us-tesla-musk-lawsuit-idUSKCN21X33A