by Greg Barker
Thursday, 14
April 2022
Debate
13:23

Elon Musk’s bot army is secretly boosting Tesla

The electric carmaker's popularity is not as authentic as it may seem
by Greg Barker

Elon Musk can’t stay out of the news. Today, it was revealed that the tech billionaire offered to buy Twitter for $41.4 billion, while earlier this week, the LA Times published a contentious piece about Tesla, punching yet another hole in Musk’s ‘tech genius’ narrative. “Twitter bots helped build the cult of Elon Musk and Tesla,” reads the headline, ‘but who’s creating them?”

The piece was referring to a recent study by University of Maryland School of Business professor David A. Kirsch. He concluded that social media bots “played a significant part” in securing Tesla’s status as a meme stock, which in the cheap money era guaranteed to propel the EV company’s valuation to loftier levels than anything “traditional financial analysis” could quantify.

Kirsch’s report went on to note that out of 1.4 million tweets quoting the hashtag #TSLA posted in the last decade, 23% were bot-generated. Each time one of 186 Tesla-related bot accounts’ was created, a 2% rise in Tesla’s stock price followed. Other bots served a similar purpose for tech stocks in general, with Apple and Amazon benefiting greatly. Still, bots for these two companies were not playing a boosterish role, unlike the Tesla bots, which enabled Musk to sell equity while his company haemorrhaged $5.7 billion.

Bot manipulation, in a broader sense, adds to the rising number of so-called stock market ‘distortions’, a euphemism for market fundamentals no longer representing the valuations of companies but a range of anomalous factors.

One of those relates to Tesla’s recent allocation into the S&P 500, the most influential stock market index worldwide, which highlights the increasing role of the ‘passive investing’ industry and how its ‘irrational’ flows have twisted stock prices. Irrational here refers to the flow of funds coming in from passive investing giants like Vanguard and Blackrock, who prefer to allocate capital to specific S&P 500 stocks based on their weightings in the index, not conventional fundamentals.

Meanwhile, a growing number of ordinary people have started to believe that markets reflect the price level at which central planners desire. Governments and central banks now play a more-than-desired role in the economy, jamming larger amounts of monetary stimulus into the financial system to paint over a lacklustre real economy.

This departure from the original definition of fundamentals has increased scepticism around traditional investing so much that alternative investments such as cryptocurrencies and gold — and the questionable narratives like U.S. dollar doom surrounding them — have gained significant traction. 

Those in total disbelief at sky-high stock prices have avoided traditional investments altogether. We’ve even seen thought leaders of financial rebellions like the crypto bros conclude that the entire stock market has become an elaborate Ponzi scheme. Though stock markets don’t match the definition of a Ponzi — which is a financial structure that produces a negative-sum outcome — the fact that even notable finance figures have reached such a conclusion exposes an extreme amount of distrust in the system. 

Alas, with the ever-increasing amount of shenanigans forming around Tesla, a company whose stock will likely gain increased market dominance, things are likely to get a whole lot worse.

Greg Barker is an independent journalist and quant, who also writes under the name Concoda. You can find him on Substack and Twitter at @concodanomics.

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Martin Bollis
Martin Bollis
2 months ago

Interesting. An anti woke has bought into Twitter and over the last few weeks I’ve read several “Tesla is built on sand” articles.

It probably is, I don’t know enough about it to know. I was just struck by the coincidence.

Lesley van Reenen
Lesley van Reenen
2 months ago
Reply to  Martin Bollis

In the opening paragraph the author quotes the LA Times and actually provides a link… and I stopped reading. I would have pressed through otherwise. Really, why do authors provide links to media that have been thoroughly discredited.

Michael K
Michael K
2 months ago
Reply to  Martin Bollis

The modern economy is built on sand. Tesla is built on government grants.

Liz Walsh
Liz Walsh
2 months ago
Reply to  Michael K

I find it delightful that he takes money from the man, only to parlay it into some more ultimately stuff-disturbing high jinks.

John Murray
John Murray
2 months ago

I dunno, you tell me he’s not a tech genius, but that he used an army of bots on Twitter to boost his stock price and make a fortune. I mean, he might be an evil tech genius, but it does sound like he knows what he’s doing with tech!

Andrew Lale
Andrew Lale
2 months ago

‘The electric carmaker’s popularity is not as authentic as it may seem’. You hope…

Last edited 2 months ago by Andrew Lale
Michael K
Michael K
2 months ago

Anybody who has followed Musk for more than a week would know how unfounded all of this stuff is. The man isn’t one of those greedy oligarchs. He only cares about money as much as it enables him to colonize Mars. And he realizes that if he doesn’t also help fix some problems on earth right now, his main mission is not going to progress at all.
The man is a risk-taker, an engineering genius and, in the end, still a normal person.

R Wright
R Wright
2 months ago

Everyone knows Twitter is 50% bots. It’s in Twitter’s shareholders’ interests that this fact be ignored. Elon knows this.

David Simpson
David Simpson
2 months ago

Seems like mr Musk knows what twitter’s good for (and perhaps all it’s good for). Ha ha, and good luck to him. And if he’s faking his stock price, how many others have been doing the same?

Jon Hawksley
Jon Hawksley
2 months ago

The LA times article on Tesla states “Operational results can’t justify anything close to the company’s $1-trillion market value, based on any kind of traditional stock-pricing metric.” If anyone has read a mathematically sound article that justifies a niche EV manufacturer being worth more than all the other quoted car manufacturers please say so. The traditional metric looks at the potential cashflow produced by an investment from its operations and sale of assets but excludes “The greater fool” factor, a sale of the shares to someone at a higher price who in turn relies on a greater fool to buy them in the future at a yet higher price. The classic case study of greater fool pricing is tulip mania in 1637. It is crucial in investing in any crypto currency, where there is no underlying fund to pay out investors. It underlies pyramid selling. It is unbridled greed that inevitable ends in tears for those that do not find a greater fool to buy their investment. It needs to be discussed much more widely.
This article highlights a disturbing factor in the generation of hype that promotes greater fool investments. This makes financial education even more important.

Last edited 2 months ago by Jon Hawksley
Michael K
Michael K
2 months ago
Reply to  Jon Hawksley

The LA times article still thinks in market dynamics from 20 years ago. These types of rules haven’t applied for a while now, which is very obvious in the tech sector especially.
Tesla (and Musk) would have gone bankrupt had it not been for some initial success of SpaceX, which sent him from the brink of bankruptcy to ultimately become the richest man alive. I’m not sure that betting against Musk is the smart thing to do, certainly the past would suggest the opposite. And if you won’t take being the literal richest person alive as proof of that, there isn’t anything more I could say.

Hardee Hodges
Hardee Hodges
2 months ago
Reply to  Jon Hawksley

Stunning that greater fool thing. I’m not an owner of the shares. The insane valuation can’t be sustained. But investors are free to do as they wish. They might imagine being at the start of Amazon, who knows. Tesla futures rest on the company delivering value, so far it hasn’t but it has been able to create a huge technology shift. Can’t think bots affect wise investors so greater fools may learn the hard way. I don’t care what others do in a free market.

Mike Hind
Mike Hind
2 months ago

Two features of 21st century social liberal discourse make me wary of this LA Times story.

1. The belief that certain opinions and ‘hate’ are not valid under a principle of freedom of expression.

2. The belief that many of those who express certain views and sentiments are not biological humans and therefore fake actors.

Most of the ‘bots’ that are actually influential on Twitter invariably turn out to be real people.

Here’s an example https://rarelycertain.substack.com/p/the-russian-troll-who-wasnt?s=w