Is It OK to B.S. Your Shareholders on Twitter?

YCharts

Tweeting CEOs are often entertaining, but you might want to take their stock tips with a healthy dose of skepticism. Just ask investors who jumped on Elon Musk’s post last week that promised “a really exciting @TeslaMotors announcement.” The news turned out to be not quite as exciting as some investors expected. The chart below shows early trading of Tesla Motors (TSLA) shares after the late Thursday announcement.

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TSLA Chart

The promised news involved a partnership with US Bank (USB) and Wells Fargo (WFC) that essentially puts customers into Tesla cars for no money down and a monthly fee that may or may not be about $500. (The down payment is covered by federal tax credits electric car purchasers can receive. The $500 figure involves several assumptions about things like how much the driver will save on gasoline, shorter commute for using carpool lanes and a guaranteed resale value.) It’s essentially an unusual lease with an option to buy. But it is good news for an unproven company trying to sell a car with a base price of $69,900.

Musk’s Twitter followers, however, had perhaps expected something more substantial. When he wrote “Am going to put my money where my mouth is in v major way,” as he did in the March 25 tweet, some speculated that the company would launch a welcome debt reduction campaign, or announce a cash infusion, perhaps from Elon himself. The share price, as seen in a stock chart, rose more than 20% between his first heads-up tweet and the official bank partnership announcement.

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TSLA Chart

Musk threw in a couple of teases following his original message. The original message promised an announcement last Thursday, but it was quickly followed with a correction to Tuesday (of this week). On Monday, Musk said that his promised announcement would be “arguably more important” than the company’s officially released forecast that day, which promised “full profitability” for the first time but no hard numbers. Then, following several updates on his non-Tesla SpaceX project, he wrote this on Tuesday, pre-announcement: “Today's Tesla announcement is actually the 2nd in a 5 part trilogy (love Douglas Adams).” We will not even attempt to guess what this means for investors.

All of this brings up the question of whether it’s even legal for Musk to jerk the share price. Tesla’s official announcement Tuesday came out just as the SEC gave a qualified blessing to Twitter as an outlet for market-moving news. The regulator wants companies to designate an account as official before releasing info there. Criticism of Musk’s posts is moot if his tweets weren’t really the mover behind the share price. And there was that forecasting news in play during at least part of this drama.

Now, if only Musk would post the actual profit forecasts on Twitter: that would be an actionable tweet.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com.


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