Musk's short-seller obsession goes off the rails
Elon Musk just can't seem to help himself.
Even with the Securities and Exchange Commission and Department of Justice pursuing further investigations of himself and Tesla, the electric automaker's CEO seems unable to put the open-and-shut case against his "funding secured" tweets behind him.
First, he rejected a settlement deal with the SEC, threatening to quit Tesla if the board took the offer and demanding that directors "extol his integrity" in a public statement. Then, after Mark Cuban warned him away from fighting the SEC, Musk took a slightly worse settlement deal after all. Now, with that deal still not even finally approved by a judge, Musk seems to be trying to scupper it again with a series of tweets attacking the commission as the "Shortseller Enrichment Commission."
Any one of these twists and turns would be unusual for a lawyered-up CEO facing swift action by a regulator, but put them all together, and it becomes all but impossible to make any sense of them. Untangling the intentions behind Musk's moves is starting to seem like less of a job for a legal strategy expert and more of one for a psychologist.
If Musk's tweets are the best insight we can currently get into his thinking, his latest round offers two major takeaways: first, that he can't put the "funding secured" incident behind him and second, that his obsession with short sellers goes deeper than his sense of self-preservation or even Tesla's own interests.
It's important to remember the context here: In January 2012, when Tesla stock was trading at around $26 a share, Musk tweeted, "Even though they cause me grief, I would defend the right of shorts to exist. They are often unreasonably maligned." Thursday night, after Tesla closed at nearly $282 per share, he replied to his own tweet, saying, "The last several years have taught me that they are indeed reasonably maligned" and "What they do should be illegal."
Tesla shares fell 7 percent to close at $261.95 on Friday.
Extraordinary wealth creation
Musk's change of heart can't possibly be because he has personally suffered at the hands of people betting against his company. His 33.7-million-share stake in Tesla was worth $900 million when he was defending short sellers' right to exist, and it's worth about $9.5 billion now that he's changed his mind and wants short selling to be illegal. Given that such extraordinary wealth creation was based on shares in a company that has never turned an annual profit and which has had to raise cash on a regular basis to survive, Musk hardly seems a victim.
Musk's attack on the SEC was followed by ranting about the fact that passive index funds lend out their shares for use in shorting, something that has no direct bearing on Tesla at all. It's as if Musk is more obsessed with shorts and the idea of shorting than he is with Tesla or even his own self-interest. The shorts have gone from a useful foil to a self-destructive obsession for Musk, to the point where lashing out is more important than securing a settlement that is already worse for his having rejected it once.
Indeed, the entire "funding secured" situation seems to have been intended to protect Tesla from short sellers but has turned out to have been more destructive to Tesla's share price than anything short sellers ever managed to pull off. And now, Musk's obsession seems to be driving him to do even more damage by potentially scuttling the SEC deal.
If Tesla's fans, investors and board of directors can't rein in Musk's increasingly self-destructive impulses, the authorities may just have to. Musk's downward spiral is looking for a bottom that, thus far, nobody has been able to provide.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.