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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."
I haven't listened to the call, so I don't know what kinds of questions he was asking, but the crybaby analyst probably asked some kind of question he obviously wasn't going to get an answer to. Musk isn't there to fellate wall street, he's got enough investors that he doesn't have to... yet.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
The issue is that during an earnings call, you field the analyst questions, not indulge feel good fanboyism.
His rationale was that the ones he snubbed were 'sell-side' and therefore just out to screw him over to help those who have shorted stock, which is problematic as that isn't what 'sell-side' means. It seems he doesn't understand that (bad for one having that responsibility) and that he is sore over how many people are shorting Tesla stock, and unable to handle it.
Even if he did feel the analysts were spinning a bad story out to get him for the sake of boosting the fortunes of those holding a short position, the right response would be to face it head on and point out how he feels the narrative implied is inaccurate, not to cut it off, which gives an impression that you don't have a rebuttal for such a story and as such the people advocating a 'short' position are right.
Musk may be unable to provide good business leadership through controversial/rough times.
XML is like violence. If it doesn't solve the problem, use more.
They really don't invest in you because they believe in your business and business model anymore.
Uh, that's exactly why they invest. If they think your business model will work and generate income, then they will invest.
In any case, IT'S NOT ELON'S MONEY. He's taken 12.7 BILLION dollars of investor money after 27 rounds of financing. Yeah, investors get to ask some questions. If he doesn't like answering those questions HE SHOULDN'T HAVE TAKEN THEIR MONEY.
My Other Computer Is A Data General Nova III.
" respected Wall Street analysts...."
That is exactly how the Wall Street racket works, by selling fake expertise on the basis of reputation.
Musk's disrespect for Wall-Street is certainly warranted. Analysts claim to possess expert knowledge which will yield higher returns, when really their returns are worse than a dumb strategy such as ETFs. Retrospective comparisons of analysts picks to passive investment show analysts perform worse.
Investment firms are a scam. Do not be a sucker and a victim. Read about investment from someone who is not trying to extract money from you.
That Musk moved the price of Tesla shares by blowing off analysts just shows how many idiot investors there are. When idiots sell their Tesla stock because Musk hurt the feelings of the con artists, the smart move is to buy Tesla.
Ceci n'est pas une signature.
If you followed his twitter feed, he's not upset about how many people are shorting Tesla, he's giggling about it. He finds them amusing. Just the other day he issued another one of his "oh by the way..." notices that he did the last two times right before there were short squeezes.
As for the two questions he didn't answer: Tony just jumped in, tried to take a third question without having been told he could (the normal rule is two), and asked about something that was right at the bloody top of the investor letter that everyone was supposed to have read before joining the call. Yes, that's a "boneheaded" move. The second was from Joseph Spak. I assume you don't know him in relation to Tesla, but he's been pushing this ridiculous pro-short hypothesis - which he was trying to do in the call there - that Tesla is somehow in danger because Model 3 conversion rates (people going from a waiting list to a purchase when their number comes up) are lower than average. Which is ridiculous for two reasons - firstly because of course they're low, because you can only get the car in a very limited number of configs right now, so of course a good chunk of people are going to choose the delay option. And secondly, with nearly half a million people on a (growing) waiting list with no advertising whatsoever, it doesn't matter a whit. There's zero chance whatsoever that they're going to run out of reservations. They're going to be supply-limited for years, not demand.
"WANTED: Sinking ship seeks rats."
Not to inject facts into a good discussion, but the reality is that Tesla stock dropped about 2% after the call, and it's already rebounded. (If you include the part of the drop that occurred right before the call, it would be about 5%. Figure $301 to $284 and back.)
Look at the 1-month variation in this link and note that the variation after the call is about the same as four other similar variations in the past 30 days.
Big, fat hairy deal.
Also, the questions that Musk avoided weren't "sober questions by respected Wall Street analysts", they were leading questions intended to elicit a response that could be taken in a negative light. In one case, the question was answered completely by the filed papers, and illustrated that the asker didn't do his homework.
Tesla is the most shorted stock in history right now (not most shorted in todays market, by some measures it's the most shorted stock of all time), and a lot of people would like to see it fall so they can make some money.
You won't get an honest opinion about Tesla for awhile, not until the short sellers realize that they can't bring the stock down using hype.
I will try to explain this in simple, non emotional terms. Tesla is not profitable. This means that they spend more money than they take in. This means that in order to continue operating, they need to get more money. The typical two ways companies raise money are to issue new stock (which will dilute the value of existing stock, similar to inflation from money printing) , or issue bonds. They could also sell assets, if they have some that someone is willing to buy.
What will happen if they don't get more money? They will run out of money and be unable to pay employee salaries. Also, suppliers will get wind of it and demand payment upfront. Based on present cash reserves and the rate at which the are being depleted, Tesla is likely to require a cash infusion of billions of dollars in 2018. That is how serious it is. Once you stop paying suppliers and salaries, it will probably become necessary to declare bankruptcy to avoid chaos. Companies can survive bankruptcy and emerge and continue to operate, but I think it is fair to say that the company will never be the same afterwards.
In order to issue new stock or sell new bonds, realistically, Tesla will be forced to deal with Wall Street, and to maintain a positive image for those who may be interested in making the investment. So, even though you may remain bullish on TSLA, it is the job of the CEO to make sure that Wall Street analysts also remain bullish. Sniping or blowing off the questions of analysts during an earnings call is not a way to inspire confidence. What it shows is an inability to deal with unpleasant realities.
The constant turnover in high-level positions is also something that detracts from confidence in the company. In short, Tesla has problems, and the actions of the CEO on this earnings call made the problems worse.
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Uh, that's exactly why they invest. If they think your business model will work and generate income, then they will invest.
That's exactly why you SHOULDN'T invest in Tesla if that's your view towards investments.
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.
Wall Street investors just want their quarterly earnings, they want it fucking yesterday and those misanthropic money-grubbing bastards don't give a shit if nuclear war breaks out tomorrow.
I think what Musk is trying to convey to everyone is that if you want to invest in a future where humanity can colonize another planet and give us a contingency plan against a global extinction event, invest in Tesla. If you just want some fast money, fuck off and go somewhere else.
It is not B.S. Companies that can't make money will not survive. Tesla is not making money. Your starry eyed worship of a "genius with world changing ideas" is the B.S.
Established automakers are working on making an affordable electric car, Tesla makes expensive toys for the wear-the-nails crowd. They are NOT the solution
Thanks. This was what I was actually looking for. My first suspicion that something was odd was when none of the stories about this had the questions listed. They were pulling rank to defend one of their own. Given how on-point the questions from the "Youtuber" are, I am doubting it was just some Rando McCommentor.
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Yeah, investors get to ask some questions. If he doesn't like answering those questions HE SHOULDN'T HAVE TAKEN THEIR MONEY.
He seemed fine with their actual questions. It's short-term bullshit "investors" that he wasn't putting up with and to that extent told then to sell his stock and not buy it. So really, he's doing exactly what you are insisting he should.
Anons need not reply. Questions end with a question mark.
Tesla is the most shorted stock on the market, with short positions covering more than 30% of the total stock available for trading. Tesla stock has been kited to a high price by its previous short squeezes. When the commitments on short positions came due, the holders had to buy Tesla stock at the prevailing price to fulfil their obligations. They had no choice. There werenâ(TM)t lots of Tesla shares available to cover the short positions, and thus the price of the stock was driven up.
What if Elon Musk was out to further kite the value of Tesla on a short squeeze, at the expense of all of the Tesla-doubters? He might act exactly as he has been: heâ(TM)d divert attention from good news, and act like a flake. Heâ(TM)d be confident in doing this, nobody could prove it was deliberate manipulation of the stock without reading his mind. Eventually, those short positions would come due, and there would be no stock to cover them, and Tesla shares would go astronomical.
Short positions like this are called âoewidow makersâ. They can wipe out investors and sometimes drive them to suicide. Elon Musk made his fortune, and continues to, by taking risky actions that other people wouldnâ(TM)t dare. He obviously has an ego, and pauperizing the shorts would fit that.
Bruce Perens.
So we can agree that the dialogue between Musk and the "YouTuber" was rich and informative, almost like a well-scripted presentation.
At least for the latter, the correct response would be to highlight *on the call* that you have had a buyer for every model 3 that has come off the line and how badly the conversion rate would have to be for there to be a surplus of car production at some timeframe, not to snub the person because the question irritates you as you don't like their agenda. If this is a known agenda, then he should have a succinct yet useful response off the top of his head at this point. On the face of it, it doesn't seem a hard question to address, regardless on his feelings on the motivations behind it.
XML is like violence. If it doesn't solve the problem, use more.
Tesla does NOT have the battery operation im-house. He simply has a 'deal' going with Panasonic. If his money goes dry Panasonic will make deals with whomever has the actual cash in hand..
This is very different from the way Amazon ran at a loss for a long time. Amazon was building retail sales network in a totally new market. Tesla is just selling cars to the small number of millineals in the 1%.
Plenty of incredibly good business ideas are ones that need patience and time to bring to fruition. There's a need to do due diligence and make sure the company isn't just a false front, or a bunch of clueless idiots wasting every dollar they're loaned. But a company like Tesla has already proven it can deliver a working product that people find desirable. In fact, they did it several times over -- ever since the first Tesla Roadster came out.
Wall Street is destroying a lot of great ideas because they hyper-focus on short term results. If you're a big, established firm, that's probably fine. They generally sell in saturated markets where their profits are relatively stable. But for anything else, you used to have a lot of investors who bought and HELD stocks because they truly liked what the company was doing. They weren't living "quarter to quarter" to look for the first sign they needed to do a sell-off.
All the computerization of Wall Street is probably what led to a lot of this. Computer automation and ability to execute micro-trades super rapidly over high speed networks turns it into a pure game of numeric trends, vs. wishing to put your money into a business you believed in.
What we learned is that Musk has not realized that those stockholders are the owners of the company, not him.
And neither are the analysts who are upset and asked the questions we are discussing. Those are short sellers who have a negative interest in TSLA. The YouTube "retail" investor is a much better representative of the investors in TSLA. Also, the questions the analysts (accountants) ask have little to nothing to do with the current valuation of TSLA. Nobody is betting on TSLA to get the profits from the model 3. They are going long here because they think the company will be the first to mass produce electric cars with an vertically integrated supply chain for the batteries which puts them in a dominate position in transport going forward. Couple that to the fact that the entire economics of the auto industry could likely change over the next 20 years as self-driving cars become common. Also, auto ownership possibly transitions to renting (aka ride sharing). So these are the issues for which most investors are buying TSLA. So the YT questions are actually more useful to the investors than the accounting questions the analysts are asking.
"Those that start by burning books, will end by burning men."
It is not B.S. Companies that can't make money will not survive. Tesla is not making money. Your starry eyed worship of a "genius with world changing ideas" is the B.S.
Established automakers are working on making an affordable electric car, Tesla makes expensive toys for the wear-the-nails crowd. They are NOT the solution
Yes, but those other auto makers spend how much on marketing and sales? (billions of $) And Tesla spends what to generate those same amount of sales? (basically $0) There's your first strategic advantage. And where do you think those "established automakers" are going to get all those batteries? Oh, from TSLA because your cell phone battery isn't really the same thing as a car battery. And they will be the only company of scale focusing on those car level batteries. There's strategic advantage #2.
You keep thinking Ford can just mass produce an electric car anytime they want. Sorry, but that's the magical thinking here. They can mass produce ICE cars but electric cars are different enough that they can't just order some motors from GE and some batteries from Samsung and be in business. Also, the basic business model of all "established automakers" can't survive in an electric world as they make a significant amount of their revenue on parts and maintenance which is going away (both due to electrics and improvements in manufacturing). GM might have a better time of it, due to their better electric cars but they still face the scale problems with batteries like the rest of the automakers.
"Those that start by burning books, will end by burning men."
It is not B.S. Companies that can't make money will not survive.
You seem to not understand the difference between a bluechip company and a growth company.
Established automakers are working on making an affordable electric car,
In America established automakers have been "working on it" for years and have nothing to show. In Europe people don't like the Tesla for the large American tank that it is, and Telsa is rightfully behind the automakers who make a more European style car. If those established automakers were resting on their laurels for 14 years and are having their lunch eaten.
Tesla makes expensive toys for the wear-the-nails crowd.
The Model 3 costs $358 less than the average new car price.
The Model S is the most popular electric car in America.
They clearly are the solution and have been the solution for a while.