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Tesla Stock Plunged After Elon Musk's 'Bizarre' Conference Call (wired.com)
A recent Bloomberg article describes Elon Musk's "bizarre" conference call on Wednesday -- and its aftermath on Wall Street.
Elon Musk told investors not to buy Tesla Inc. shares if they can't stomach volatility. They got the message. The comments -- part of a bizarre, heated conference call after the close Wednesday -- sent the electric-car maker's stock plunging. Tesla fell as much as 8.6 percent Thursday after the chief executive officer rejected analysts' questions on another quarter in which the company burned more than $1 billion in cash.
Investors had shorted a total of more than 40 million shares by Thursday -- the most ever in Tesla history -- and despite a rise in Tesla's stock price on Friday, they shorted 500,000 more shares.
Wired argues that Musk "clearly is avoiding some hard questions about Tesla's financial viability. But it's equally true that the call exposed how limited Wall Street can be about visions for the future and what it takes to create new templates for doing old things." This clash was highlighted by Musk's response to "sober questions by respected Wall Street analysts" like Toni Sacconaghi.
Musk brushed him off, sniping that "bonehead, boring questions are not cool." To add insult to that injury, Musk then fielded questions from a YouTube user, who proceeded to dominate a call normally open only to significant Wall Street analysts. That did not sit well with the Street, and Sacconaghi lambasted Musk the next day on CNBC with the rather clever jab, "This is a financial analyst call, this is not a TED talk."
Friday, Musk returned fire, with tweets asserting that the question was boneheaded because the analyst already knew the answer and was asking purely to advocate a negative thesis about the company.
But Barron's replayed the conference call, and argued that Musk was mistaken, reporting that "the analyst wanted to know about capital requirements, not expenditures."
Investors had shorted a total of more than 40 million shares by Thursday -- the most ever in Tesla history -- and despite a rise in Tesla's stock price on Friday, they shorted 500,000 more shares.
Wired argues that Musk "clearly is avoiding some hard questions about Tesla's financial viability. But it's equally true that the call exposed how limited Wall Street can be about visions for the future and what it takes to create new templates for doing old things." This clash was highlighted by Musk's response to "sober questions by respected Wall Street analysts" like Toni Sacconaghi.
Musk brushed him off, sniping that "bonehead, boring questions are not cool." To add insult to that injury, Musk then fielded questions from a YouTube user, who proceeded to dominate a call normally open only to significant Wall Street analysts. That did not sit well with the Street, and Sacconaghi lambasted Musk the next day on CNBC with the rather clever jab, "This is a financial analyst call, this is not a TED talk."
Friday, Musk returned fire, with tweets asserting that the question was boneheaded because the analyst already knew the answer and was asking purely to advocate a negative thesis about the company.
But Barron's replayed the conference call, and argued that Musk was mistaken, reporting that "the analyst wanted to know about capital requirements, not expenditures."
The YouTuber asked the best questions on the call. The questions Musk didn't answer was A) Tony Sacconaghi's third question (he was only allowed two, and he didn't even ask before launching into a third), asking about something that was in boldface right at the top of the investor letter that everyone was supposed to have read before joining the call. And B) Joseph Spak advocating for a short selling thesis he's been pushing where he argues that there's a low conversion rate on Model 3s - despite the fact that of course there is because people can only get a very limited subset of options right now, so the majority are deferring to get their desired options.
The YouTuber, by contrast, asked about:
1) Progress with the Tesla network
2) Production capacity on the 3 line at Fremont and how they're supposed to fit Y production in there
3) Daimler's statement about Semi "breaking the laws of physics", and whether they need a new battery technology to achieve it
4) Whether Tesla plans to go to 350kW supercharging like Porsche is talking about
5) Whether Tesla is still willing to open up the Supercharger network to competitors
6) Power rates and supply-side costs for Semi megachargers
7) Prioritization of home-scale vs. utility scale on energy storage products and the state of the market going forward
(He got to ask so many because: "We'll keep going if you (46:57) ask questions that are not boring"; he didn't just start butting in with extra questions like Tony)
And from these questions, we learned that:
* Musk thinks the software will be ready for full self driving for consumers in a year, but worries about regulatory acceptance
* A processing power upgrade might be required, they're not sure at this point - but it's a plug-in replacement.
* Musk thinks journalists are causing people to die by spreading scare stories about self-driving. Compares the scenario where you have a couple deaths with autonomous systems versus over a million per year otherwise (yet the former gets all of the coverage and the latter little) - and that this overemphasis makes people less likely to use systems that he feels significantly improves safety.
* Plans to release quarterly statistics showing the impact of Autopilot on safety
* The Reuters report that Model Y was going to be built in Fremont is completely wrong, and he has no clue where it came from. Fremont is packed to the gills already. No chance Y will be built there.
* Model Y will be released in about 24 months.
* Model Y capital spend is low right now, but will be dramatically ramping up next year. But decisions made this year will have a major impact on the capital costs for the Y next year.
* Model 3's current battery tech already supports a Semi with 500 miles range. They think they may be able to do 600 miles by the time it's in production.
* Tesla doesn't agree that going to 350kW is wise for passenger cars; looks to go to 200-250kW. With batteries, you get energy density or power density, but not both; high power density cells are not only more expensive, but less energy dense. And you can up the power density just by adding more cells. He feels you get a way better vehicle and driving experience for your money going with more energy dense than power dense, and compares it to what it would be like if you could buy a phone that could charge twice as fast but you had to charge it multiple times per day.
* Wants, and has tried, to get other automakers to use their supercharger network. Thinks "moats" are dumb, and if you're relying on a moat to keep competition at bay, you won't last long. All other automakers need to agree to is to use their connector (or an adapter) and for their vehicles to pay for the power. None have taken Tesla up on the offer.
* Finds the Nikola "windshield" lawsuit laughable - not just on its merits, but the underlying premise: people don't reserve semis for their looks, flee
"WANTED: Sinking ship seeks rats."
The main issue with Tesla is that Musk is constantly promising and NEVER delivering. People are interested in the Tesla brand and the product, but Tesla continues to under-perform and has yet to deliver in time and the delay is of an unacceptable level.
Waiting 2 years for a new vehicle is unacceptable to most with the exception of a few.
Wall Street *are* his investors, and by the stock valuation we can judge their reaction. They surely did not like this, and, apparently, were more interested to find out what the answer to the analysts' question was.
The question, more likely, annoyed Musk because it pokes at a somewhat sensitive topic. But Musk is the one being a crybaby here. If he did not need Wall Street's money - sure, he could say and do whatever he wants. Yet he does, and so he needs to please those who pay to keep Tesla running - and it's not, (yet?), it's customers.
Elon Musk is trying to save humanity. His endgame goal is to use all the money generated by his various companies and invest it in getting us the hell off this planet before we destroy ourselves. Considering politics these days, I hope he hurries up.
I am sorry for being so cynical, but that isn't how it works. If that was really what Musk was doing it would be a con game of the first order and he would need to go to prison. The investors are entitled to answers, and considerable say in how the money they invested in Musk's venture is being managed. This isn't a Bernie Madoff 'trust me' enterprise.
Tesla isn't burning billions in cash to bleach Musk's asshole. They're expanding their infrastructure, manufacturing capacity, and spending money on R&D. Ford would be doing the same thing if they were a new auto company instead of one that's been around for a hundred years. At any point, Tesla could stop expanding the Supercharger network etc and coast on their existing product to be profitable. They're obviously trying to pull an Amazon, who also did nothing but lose money for a decade before eventually turning a profit.
Worse case scenario, Tesla agrees to a "partnership" (i.e. buyout) with an established bigwig like Honda or Volkswagon.
No it isn't
It was about $300 before the call, went to $285 before market open, then to a low of $277 and closed at $284 on Thursday. On Friday, it closed over $293. So its recovered half of the price drop. It will likely recover the rest next week.
"Those that start by burning books, will end by burning men."
Copy and paste from the front page of perens.com seemed to be sufficient :-)
Bruce Perens.
The hilarity of this statement. Tesla is pretty much nothing buy hype right now.
Hype, the two most desirable car designs on the planet, and the most capable car battery factory on the planet. But yeah, aside from that, pretty much nothing, right?
Tesla is literally people hoping that they can build a car making company based on electric engines (that aren't special),
You literally could not be more wrong, Tesla's new motor is special.
batteries (that are becoming unspecial),
You literally could not be more wrong, the battery packs are becoming more special, and if you actually take the time to learn about the internals of the Model 3, you'll learn how wrong you are.
and chargers that will end up being regulated and shared (aka not special).
They're still special, and nobody has even announced plans to make better chargers yet, so I'm going to call FUD on this one.
And how many other new car companies have succeeded in recent history?
3 or 4, all making super-high-end vehicles to be fair, but it's still true.
And what about a smart software engineer with some great/lucky timing do you think is going to make this any easier?
What? That's how the world works. Great ideas at the right time succeed. Welcome to the world!
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"