Tesla shares down after Elon Musk Twitter poll

Kind of unusual…If you were the CEO of a large listed company and decided you might like to sell some stock would you a) do it quietly and file it appropriately, or b) ask millions of people on Twitter whether you ought to? Obviously, Elon Musk chose the latter. Ok, so he’s often doing dumb stuff on Twitter and sometimes doing dumber things that regulators should probably look at. And occasionally he does really dumb stuff that regulators do look at.  

So, when he asked his Twitter followers over the weekend whether to sell 10% of his stock, lots of us laughed. I mean it’s sort of weird – why not just start selling some tranches, without the fanfare and attention-seeking...hahaha. You could say he just wants to sell some stock now because the valuation has rocketed lately, cash out while the going is good. It’s hard to criticise someone for doing that, is it? And rather than get berated by his fans for selling down his holdings, he can say ‘look, you told me to do it!’. Either way, Musk was due to start selling soon anyway as he faces a monster tax bill on some of his stock options. And since he takes no salary or bonus from being Tesla CEO (he likes to remind us), the only way to cover would be to sell some shares. Seems fair enough, but does it need all the fintwit showbusiness?  

Tesla shares in Frankfurt are off about 7% this morning and indicated to fall about 6.66% (!) in US pre-market trading. Now Musk would be aware that advertising his plans to sell $21bn (at Friday’s price) in stock would lead to a fall. It’s a simple bit of supply and demand economics on show. But he probably reckons on it being short term in nature or doesn’t particularly care at these insane valuations which he must think are ‘too high IMO’. Whatever he has said before the stock has risen in the end, and this way he controls the narrative of what amounts to a pretty massive stock sale, which is ultimately at the behest of the taxman. ‘Followers urge Musk to sell 10% of his stock’ sounds way better than ‘Musk dumps 10% of Tesla holdings, cash in at all-time highs, leaves investors as bagholders…et, etc’. I’m not 100% on where this fits, but you could again make a case of sorts for making market-moving statements that you shouldn’t really be doing. Hard to say it’s manipulation, but it’s not normal.

Markets 

Stocks are largely flat to start the session in Europe after a positive day Friday saw fresh cycle highs. Weak handover from Asia as Chinese import figures indicated weaker domestic demand. US futures are steady after another round of all-time highs on Friday. Earnings are better than were expected, jobs growth is picking up and the Fed’s carried off the taper without undue alarm. Pfizer’s antiviral announcement on Friday is a major positive: Dr Scott Gottlieb said the US is ‘close to the end of the pandemic phase’. After last week’s round of policy meetings, this week we get a lot of jawboning from the likes of Powell, Bailey and Macklem on equality and diversity. We’ll also be watching the US CPI numbers on Tuesday, and UK growth numbers for the third quarter on Thursday. 

Bond yields are lower than they were last week with US 10s at 1.48%. The UK 2yr gilt yield is now back to 0.42% after trading as high as 0.76% on expectations the Bank of England would be more hawkish than it turned out to be. 

Real rates have fallen further with 10yr TIPS down to -1.09% on Friday, lifting gold to break out of the recent range and hit its highest since September. No breakout just yet but looking to the area at $1,827-1,833 to provide near-term test as this corresponds to the 38.2% retracement of the longer-term decline and the Jul/Sep peaks where we saw three attempted breakouts fail.

Crude prices are higher but just running into the resistance of the 20-day SMA. Late on Friday Aramco raised selling prices for its crude, whilst the passing in the US of the Biden infrastructure bill is also supportive.