Originally published on EV Annex.
Tesla has always been in the crosshairs of short sellers on Wall Street. Traditional financial media outlets, for years, preyed on Elon Musk for any misstep. Things have changed though. Tesla is now part of the S&P 500. And Wall Street insiders who once derided Musk and Tesla now appear to be out of step with today’s market dynamics.
Elon Musk, along with others like Mark Cuban and Chamath Palihapitiya, have a real-time ability to move markets. Zweig says these “new messiahs of momentum, with their charisma and huge followings, can unite the buying power of scattered investors better than anyone who came before them.”
“Welcome to the outsiders’ market. Now, it’s outsiders — entrepreneurs like Elon Musk … who are firing up thousands, perhaps millions, of traders and investors. They have blown away the old myth that Wall Street is the exclusive keeper of the keys to wealth, which it will share only with those who are willing to pay a fee,” writes Jason Zweig in the Wall Street Journal.
Are there recent examples of this? Well, let’s take a look back at the chronology of the much-publicized GameStop episode as a prime example.
At 10:32am EST on January 26th, Palihapitiya tweeted that he’d bought call options on GameStop, adding: “Let’s gooooooo!!!!!!!!” By the end of the next minute, GameStop’s price jumped nearly 10% as trading volume quadrupled.
Later, at 4:08pm EST the same day, Musk tweeted, “Gamestonk!!” More than a quarter-million shares traded immediately and, in 10 minutes, GameStop had shot up 31%.
Of course the GameStop story goes much, much deeper than these two simple tweets. However, that shouldn’t shortchange their surprising impact.
Another example? “If your timing was right, you might have made a lot of money over the past few weeks by following Mr. Musk into bitcoin [and] Mr. Cuban into dogecoin,” according to WSJ’s Zweig.
On February 3rd, Cuban tweeted, “If I had to choose between buying a lottery ticket and #Dogecoin … I would buy #Dogecoin.” Over the next 12 hours, the digital currency, often mentioned in Musk’s twitter feed as well, shot up roughly 50%.
On the one hand, it’s hard to argue that fast money traders aren’t at least a little inspired by big names like Musk, Palihapitiya, and Cuban. On the other hand, that shouldn’t deflect from deliberate, deeper analysis courtesy of today’s more thoughtful retail investors. Wall Street, after all, is changing.
“The internet has democratized information,” Palihapitiya told the WSJ. “So the edge has shifted to analysis. Everyone has access to the same information, financial disclosures and general data.”
“The stagnation of traditional wages has shifted people’s resourcefulness to the equity markets,” says Palihapitiya. Those who can use technology “to process this information faster or differently,” he said, now have “the new edge.”
Cuban seems to agree, adding, “Why can’t that knowledge come from the wisdom of the crowd?”
On a prior Tesla earnings call, Elon Musk echoed this same sentiment. He said, “I do think that a lot of the retail investors actually have deeper and more accurate insights than many of the big institutional investors and certainly they have better insights than many of the analysts.”
“It seems like if people really looked at some of the smart retail investor analysts, what some of those smaller retail investors predicted about the future of Tesla, you’d probably get the highest accuracy and remarkable insight from some of those predictions,” Musk said.