Note to Elon Musk: Calling a Hero a Pedo Is Never a Good Idea

The billionaire entrepreneur's erratic behavior is endangering Tesla

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Jul 16, 2018
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Elon Musk, Tesla’s (TSLA, Financial) eccentric CEO, is no stranger to social media controversy. For years, he has used his Twitter megaphone to promote his companies (and himself), as well as to challenge critics and call out opponents. But in recent months, Musk’s tweeting has seemed to consume ever more of his attention, even as Tesla’s Model 3 sedan continues to languish in “production hell.”

This has not gone unnoticed by the media or markets. Indeed, one of Tesla’s top shareholders, Baillie Gifford, has recently called for an end to the circus of distractions, signaling that the company – and its CEO – should be focused on “peace and execution.”

In an interview with Bloomberg published July 13, it seemed as if Musk was starting to listen to the criticism:

"I have made the mistaken assumption — and I will attempt to be better at this — of thinking that because somebody is on Twitter and is attacking me that it is open season. That is my mistake. I will correct it."

Evidently, the correction has yet to be made since, on July 15, Musk went on a tirade against a member of the team that helped to rescue the youth soccer team that spent days trapped deep underground in flooded caves. Vern Unsworth, an expert cave diver, derided Musk’s efforts to aid in the rescue as a “PR stunt.” In response, Musk took to Twitter to call the rescuer a “pedo guy,” suggesting that the British expat’s choice to live in Thailand was indicative of pedophilia.

In a previous research note, we commented on the fact that Musk’s public persona, which has long been seen as one of Tesla’s critical assets, was becoming a liability. With his latest tweet-storm attacking one of the heroes of the Thailand rescue, that observation has been reinforced.

Mini-subs and major snubs

Musk is notorious for not taking criticism well, but his decision to insert himself into the Thai rescue operation sparked an even pricklier attitude than usual. While the rescue operation on the ground was underway, Musk began spitballing the idea of building a “mini-submarine” that could carry the boys one-by-one to safety. Musk set some of his engineers to the task, and corresponded with one of the senior rescue coordinators. In the end, however, the sub was found to be “not practical” for the operation and was not used. This seemed to irk the Tesla CEO, who defended the sub’s efficacy and bristled at the accusation that the whole operation was little more than a PR stunt.

In the end, all the trapped players and their coach were rescued safely. It seemed as if the crisis (and Musk’s involvement) were at an end. Alas, that was not the case.

In an interview published on July 14, Vern Unsworth was unsparing in his criticism of Musk’s mini-sub idea:

"It had absolutely no chance of working. He had no conception of what the cave passage was like. The submarine, I believe, was about five foot six long, rigid, so it wouldn’t have gone round corners or round any obstacles. It wouldn’t have made the first 50 metres into the cave from the dive start point. Just a PR stunt."

Already off the wagon

Within days of his Bloomberg interview, Musk was apready breaking his social media promise – and in spectacular fashion. In response to Unsworth’s criticisms, Musk took to Twitter to defend his submarine, as well as to attack the rescue worker:

"Never saw this British expat guy who lives in Thailand (sus) at any point when we were in the caves. Only people in sight were the Thai navy/army guys, who were great. Thai navy seals escorted us in — total opposite of wanting us to leave.

Water level was actually very low & still (not flowing) — you could literally have swum to Cave 5 with no gear, which is obv how the kids got in. If not true, then I challenge this dude to show final rescue video. Huge credit to pump & generator team. Unsung heroes here

You know what, don’t bother showing the video. We will make one of the mini-sub/pod going all the way to Cave 5 no problemo. Sorry pedo guy, you really did ask for it."

That’s right: Elon Musk, billionaire entrepreneur and hero to many, called an actual hero a pedophile.

Keep on digging

Musk’s attack sparked immediate negative reactions, with headlines Sunday emblazoned with stories about his bizarre and evidently unfounded attacks on Unsworth leaving many – including his most ardent fans – aghast.

When called out about it on Twitter, Musk’s first reaction was to double down, replying to one commenter: “bet ya a signed dollar that it’s true.”

However, as the backlash mounted, Musk went silent and requests to comment to Tesla and SpaceX went unanswered. The tweets also disappeared, but not before they had been saved numerous times.

Loose lips sink stocks

Speculation that Unsworth might sue, as well as the reputational damage facing Musk as a result of this latest kerfuffle, led to Tesla shares dropping in Monday morning trading.

The danger could be longer-lived. On a purely legal basis, Unsworth appears to have a textbook case for defamation and, as a U.K. citizen, can access the English courts which are some of the more favorable to plaintiffs in the Western world.

Now, a defamation lawsuit, even an open-and-shut one, is not likely to kill a normal company. But Tesla is not a normal company. In many ways Elon Musk is Tesla. When his reputation suffers, so does that of the company. Tesla has continued to chug along, and to enjoy an astonishingly generous market cap, largely thanks to the market’s willingness to believe in Musk. That extends to persistently missing deadlines and even going back on promises.

If Musk no longer gets the benefit of the doubt, neither does Tesla. And that could mean serious trouble for the company, and its stock, in the turbulent times ahead.

Disclosure: I/We are short Tesla via long-dated put options.