Someone is active on social media and, for once, it’s not Donald Trump. Tesla CEO Elon Musk caused quite a stir this week with Twitter comments about taking the electric car-maker private. Are outspoken leaders a good thing for stocks? Here’s my take on the issue.

There are plenty of corporate leaders and politicians with larger-than-life personalities (see Mike’s piece on House of Fraser). Some pretend to be rock stars, others are no-nonsense musicians. Just look up new Goldman Sachs CEO David Solomon, or DJ D-Sol as he is better known to Electronic Dance Music connoisseurs (his stuff is even on Soundcloud).

Spinning plates in your spare time is all well and good, but it’s another thing altogether when the CEO’s gung-ho social media personality starts moving the share price. Take Tesla’s recent see-saw swing on the Nasdaq. By now everyone’s heard about Musk’s out-of-the-blue Tweet about taking Tesla private at $420/share (and, importantly, the funding already in place), so I won’t dwell on it.

The immediate stock market reaction, of course, was to match the Leveraged Buy-Out’s implied price, with Tesla shares shooting up around 11%, rising as far as $387 to revisit last year’s all-time highs. Not quite the suggested $420 level, still a nice return for traders, right? Not so fast!

Musk’s comments have come under intense criticism from investors over both the style and substance of his announcement, with some even suggesting “market manipulation” (the SEC may investigate according to The Wall Street Journal). Shares are now all the way back to the $352 level, only slightly above the $342 where they closed 6 Aug, the day before the all the excitement.

Were these off-the-cuff Twitter “press releases” worth it, both reputationally for the company, the CEO, and, more importantly, investors?

The most obvious lesson of the Musk story is that corporate-news-via-Twitter is a short-term investment affair. Too many moving parts, too many variables. If your CEO is such a quick-draw hot-shot gunslinger, something will inevitably come along that is even hotter and move the share price back down.

Holding shares in companies like Tesla over the long-term can be a rocky ride, requiring confidence in Musk’s vision. Many aren’t, hence the shares being among the most shorted on US equity market, investors betting they will fall in value.

Don’t get me wrong. Companies like Tesla can still be great long term investment opportunities (+15% rise after Q2 results on 2 August is testament to this), but, as an trader, you need to be prepared for the inevitable ups and downs, prepared to enter and exit positions quickly. Does your broker keep you informed about companies like Tesla that have social-media-crazy CEOs? No need to be afraid, they can serve as great buy or sell signals.

At Accendo Markets, we do that kind of research and monitoring for you, the client, day-in and day-out. You too can benefit by simply clicking here to  access our research and trade ideas to rev up your trading or investments.

David Paradis, Trader at Accendo Markets, 10 August 2018