Private companies may be shielded from the type of short-seller funded media campaigns that Tesla has experienced over the last year but that doesn’t mean they are immune from unsavory behavior by their competitors.
As detailed in a recent Ars Technica report, SpaceX recently found itself on the receiving end of several negative, strategically placed OpEd articles ostensibly submitted by former NASA Apollo scientist Richard Hagar.
While the issues raised in the OpEds may merit consideration, journalist Eric Berger has uncovered an interesting subplot to this story. Berger’s research discovered that in at least four instances, the articles were not even submitted by Hagar (in fact Hager only sent them to one Boeing employee) but instead were sent to the newspapers by a secretive Washington, DC-based public affairs firm working on behalf of Boeing. This firm, the Law Media Group, strategically submitted an identical OpEd to six local newspapers in the states where NASA’s three main human spaceflight centers are located, namely: Texas, Florida and Alabama.
“The lack of a meaningful response from Boeing is deafening” – Eric Berger
Law Media Group publicizes their goal of “relentlessly driving public conversations to win every news cycle every day.” Yet as competition intensifies between SpaceX and Boeing for the first commercial manned space mission, Boeing faces an increasing incentive to sway public opinion in an industry where billions of publicly-funded NASA contracts are at stake. Neither Boeing nor Law Media Group would acknowledge the details of the arrangement when their plans were revealed.
SpaceX’s experience illustrates the competitive implications that both publicly and privately-traded disruptors face. Like SpaceX, Tesla is often the subject of negative press motivated by the competitive threat it poses to the auto industry or by the short sellers betting on the demise of its stock. As Elon Musk says,
“They’re constantly trying to make up false rumors and amplify any negative rumors. It’s a really big incentive to lie.”
While SpaceX isn’t currently subjected to the short sellers, this may not always be the case for future disruptive private companies. As the nascent market for security tokens and tokenized real assets evolves, the market ecosystem around security tokens will also evolve. Security token exchanges like tZero and OpenFinance will need market makers to provide liquidity to both issuers and secondary buyers and sellers, a subset of which will take short positions in security tokens.
As the $10 trillion dollar market for tokenized securities evolves to include private companies, short sellers will have a new asset class for which they are incentivized to follow the Tesla playbook. If history is any guide, their focus will be those tokenized companies that most heavily rely on the security token markets for funding.
Elon Musk has both the financial resources and the personal brand to withstand attacks such as Boeing’s campaign against SpaceX or the short-seller campaigns against Tesla. However, what happens when smaller tokenized companies find themselves in similar circumstances?
As the security token market matures, it is important for the industry to recognize that while tokenization improves the current capital markets for the better, this change is a net positive that ultimately does also introduce new risks. These risks must be addressed responsibly for the security token market to realize its full potential.
Ultimately the effort to drive public sentiment centers around the merits of the argument or the intrinsic value of an asset. However, firms like Law Media Group operate anonymously on behalf of clients like Boeing without revealing their biases or motives and their pressure can have real consequences. One template for the media industry broadly is Facebook’s policy to reveal the funding source of political campaigns.
In the Tokenist’s opinion, examples like Boeing’s secretive PR campaign against SpaceX or the short-seller funded campaign against Tesla highlight the need for transparency in the media supply chain. Perhaps new security token regulations and reporting requirements can consider encouraging security token news sources to reveal potential economic or political relationships that might motivate publication or bias the information presented.
For instance, readers would probably want to know that a demonstrably false article was written by someone who socializes with the hedge fund manager with a large short position. Perhaps the transparency of public blockchains can drive standards that better expose motives so that these types of risks don’t outweigh the significant benefits that security tokens promise.