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."

Comments

I get his frustration completely ....

[King_TJ]

Unfortunately, as soon as you take your company public, this is the B.S. you get caught up in. Today's Wall Street investor doesn't give a crap if you're a super genius with world-changing ideas you're trying to gear up to sell to the world. They only care about profit and loss statements and projections for the next quarter's revenue. They're going to buy and sell your stock right along with hundreds or thousands of others, going by whatever trends they think they can spot to maximize their income on them. They really don't invest in you because they believe in your business and business model anymore.

I don't work in the financial world, so maybe some others who are will challenge my assertions here? But I do have a friend whose dad owned a big investment firm for something like 40 years. He decided to retire about 8 years ago, saying he always told himself he'd quit, the day he stopped feeling like any of the investing made sense to him anymore. And that day came.....

So on one hand, I have to kind of laugh and admire Musk here, doing what he did. It's a nice "poke in the eye" to the Financial "gods" who rule American business these days. But on the other, it really is true that he's so heavily financially leveraged with Tesla that he'd have nothing but unrealized ideas if all the big lenders and investors backed out on him.

And IMO, one thing he has working against him is that he needs to build out a massively expensive network of superchargers (and maintain them all, including the promise of free charging for many customers) - BUT he doesn't get any of the government protections that we've extended others who tried to undertake similarly massive infrastructure roll-outs (such as the cellular companies). I'm not saying he SHOULD have any of that, either! But he's trying to compete against the established gas station infrastructure that benefits almost all the other auto-makers. So he's going to NEED to stay on the good side of people with lots of money to lend him.

Re:I get his frustration completely ....

[Solandri]

Today's Wall Street investor doesn't give a crap if you're a super genius with world-changing ideas you're trying to gear up to sell to the world. They only care about profit and loss statements and projections for the next quarter's revenue.

And they're right. Whether your ideas generate a profit or a loss is what distinguishes if they're super genius world-changing ideas, or deceptively seductive ideas which sound good in theory but turn out not to work in the real world due to factors its proponents are glossing over or fudging. Merely proclaiming an idea to be super genius world-changing does not automatically entitle it to profit (or in Tesla's case, investment). The idea has to pan out in real life, which is what Tesla's operating statements tell us. Dig through all the past slashdot stories about revolutionary breakthroughs in battery technology which ended up not panning out. That's the difference between how well people think an idea should work, versus how well it actually does (or doesn't) work in real life.

On the other hand, Tesla's stock price is meaningless to its operations except if Musk wants to sell more shares to raise capital. In that respect, the rantings and ravings of financial analysts are irrelevant. What matters is Tesla's revenues vs expenditures. i.e. How much they're spending to build their products, and how much/how many customer are paying to buy those products. The stock price merely reflects shareholders' confidence in the company to continue to survive and grow while making money.

Personally, I think Musk knows Tesla stock is overvalued. Its market cap exceeds Ford's while its unit sales are less than 2% of Ford's. So as long as he's got confidence in handling Tesla's debt, he's not afraid to say things which might bring that irrationally exuberant stock valuation back down to earth. That'll rankle investors who bought Tesla stock as a baseball card investment (i.e. they're hoping to sell after its value increases), while not upsetting any true believers who bought Tesla stock because they think it's the future of auto-making.

Elon, do it some more!

[steveha]

It's fun to watch, and if the stock dips down again I'll buy some more.

Tesla is a "buy and hold" stock in my opinion. Tesla has been doing everything possible to build for the future. I frankly don't care if Wall Street gets personally annoyed with Elon Musk's antics and the stock price dips. Nothing fundamental changed and the stock price went right back up again.

Re:Elon, do it some more!

[Junta]

I think the challenge is that long term, there are signs that there will be plenty of competition in what would be the bread and butter of Tesla's business.

They have been doing a lot and it has been costly, but I wouldn't be so confident that investment will become durable first mover advantage for Tesla, or if it is more the tide that raises all ships.

Re: Given the choice

[Anonymous Coward]

Until you remember how Wall Street missed Bernie Madoff, Bear Sterns, AIG, Lehman Brothers, Enron, Galleon Group, Arthur Anderson, scammed Jefferson and Orange Counties, and are pretty much the gutter monkeys of the world with the nicest suits, but the emptiest brains.

Then you realize that Emperor Norton might be wearing a fancy suit, but that doesn't make him a King.

Surprised that Jim Cramer defended Musk

[haruchai]

and despite the disbelief of his colleagues he swears he was being serious.
Seems that analyst has few fans.
That said I'm becoming ever more pessimistic that Tesla can survive. They may linger for years but unless they really pull it out of the fire by the end of this year, I can't see a turnaround without a restructuring.