By on May 3, 2018

What’s a good way of pissing off the very analysts you’re hoping to impress — or at least placate? Brush them off in the midst of an earnings call. Resorting to angsty teen language works well, too.

That’s what happened Wednesday during a call between Tesla CEO Elon Musk, Wall Street analysts, media, and one YouTuber. While the YouTuber — Gali Russell, shareholder and young host of a channel called HyperChange TV (who gained access to the call via a tweet) — ended up as Musk’s preferred interviewer, the analysts who asked questions described by Musk as “dry” and “boring” no doubt left the interaction in a state of shock.

The most pressing issue analysts wished to discuss with Musk was his company’s continued cash burn. Over $1 billion flowed from Tesla coffers over the first quarter of 2018, exceeding analysts’ predictions. Bloomberg reports that the automaker had $2.6 billion on hand at the end of March. That’s down from the end of last year.

Tesla, which hasn’t posted a positive free cash flow since the third quarter of 2016, burned through more than a billion dollars in three of the past four quarters. Musk claims his company will not need to raise funds this year.

The earnings call quickly took on an antagonistic tone, with Musk refusing to answer questions pertaining to the automaker’s financial situation, the Model 3’s future profitability, and whether reservation holders for that vehicle are dropping out.

Toni Sacconaghi of Sanford C. Bernstein asked Musk whether he expected to reach a 25 percent gross margin target set for the Model 3. Tesla CFO Deepak Ahuja had said that a number of things, including tariffs, could impact the model’s profitability.

“Yeah, but we’re talking about a 3 percent to 5 percent difference, and that’s something that we’ll solve like within three months to six months later,” Musk replied. “So don’t make a federal case out of it.”

Sacconaghi pressed on, inquiring about the company’s (lowered) 2018 capital expenditure projection. Where will the company stand in terms of capital requirements?

“Excuse me. Next. Next,” Musk told the call operator. “Boring, bonehead questions are not cool. Next?”

Joe Spak of RBC Capital Markets asked Musk just how many reservation holders were configuring their vehicle online after being invited to do so. Lengthy delivery delays could easily cause some would-be buyers to back out of the purchase, though there’s still over 450,000 reservation holders on file. Regardless, a valid question.

Musk wasn’t in a mood to answer. “We’re going to YouTube,” Musk replied, referring to the HyperChange TV host. “Sorry,” Musk said, “these questions are so dry. They’re killing me.”

Ben Kallo, a Robert W. Baird & Co. analyst who offered Musk a little sympathy before asking his question, wanted to know more about the Model 3’s production progress. The model’s ramp-up hasn’t gone according to plan. Surely, investors would like to hear some positive updates?

“I think that if people are concerned about volatility, they should definitely not buy our stock,” Musk answered. “I’m not here to convince you to buy our stock. Do not buy it if volatility is scary. There you go.”

CNBC‘s Phil LeBeau called Musk’s remarks “bizarre,” “strange,” and “odd” — a sentiment shared by other industry watchers. After missing previous Model 3 production targets, you’d think Musk would do everything in his power to satisfy nervous investors and skeptical analysts ahead of the company’s next target.

While Musk claimed during the call that his company will hit its production target of 5,000 Model 3s per week by the end of the second quarter (an effort helped by a May shutdown), as well as turn a profit later this year, pissing off analysts seems like a risky strategy for relieving stress.

Tesla’s stock dipped more than 8 percent following the call. Currently, the company’s share price is down 6.5 percent from the end of trading Thursday.

[Sources: Reuters, Bloomberg] [Image: Elon Musk/Twitter]

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43 Comments on “Analysts Aren’t Impressed With Elon Musk’s Earnings Call Behavior...”


  • avatar
    SCE to AUX

    “CNBC‘s Phil LeBeau called Musk’s remarks “bizarre,” “strange,” and “odd” — a sentiment shared by other industry watchers.”

    Agreed. One role of the Chairman is to answer the hard questions (and these weren’t that hard), even if you just give PC answers. Stiff-arming the query is bad form, to say the least.

    I, for one, cancelled as my configuration date approached. Among other reasons for cancelling, I wasn’t going to commit a total of $3500 (non-refundable) *before* driving the car.

    • 0 avatar
      phila_DLJ

      Agreed…but “bizarre,” “strange,” and “odd” are three words that mean basically the same thing.

      It’s like saying Musk sounded “mad”, “angry”, and “upset.”

  • avatar
    ColoradoFX4

    I listened to the call, and it was bizarre to say the least. Musk didn’t sound at all prepared or interested; should have just let his CFO handle the call.

  • avatar
    incautious

    Musk, just bit the hand that feeds him. There would be no Tesla without the capitol raised through the equity markets. There’s a reason that this stock is the most shorted stock at $11 billion in the country. The short sellers made a quick $700 million today because of Musk.
    Hey wait a minute maybe Musk is shorting his own company. He could’t be that smart could he? He needs the money bad, no matter what he says. Mmmm.

    • 0 avatar
      civicjohn

      incautious,

      He has 1.4 million of his Tesla shares pledged as collateral, so you can do the math on how much that performance cost him.

      • 0 avatar
        baggins

        you’re off by an order of magnitude, he has 13.7M shares pledged for personal loans.

        I bet those note holders were a little tense today. He’s acting like someone under a lot of pressure

        I see it all ending with a sale to an existing automaker at 1/10th the current value.

        • 0 avatar
          Vulpine

          Acting like it, baggins? He IS under a lot of pressure. Clearly this Model 3 ramp up has him stressed. Everything physics says should be possible is blowing up in his face. The idea of fully-robotic assembly today runs into the issues that with the long limbs required for the tasks, there’s simply too much ‘wobble’ to hit precise points accurately at the tip. Add any amount of weight out there and it gets even harder. Oh, there are ways to work with that but it means the big robots need to be supplemented with smaller robots which will be just as expensive, where humans can perform the same job as those smaller ‘bots at a lower cost.

          Now, Musk has claimed many times that Tesla is vastly overvalued; he isn’t the one whose driven the stock prices up so high. However, it seems he’s been forced to tap that value just to get things working, so yes, he could well be in the level of trouble he seems to be. Or… maybe not. There are those who have called Musk a ‘con man’ and worse over the years and maybe this ‘breakdown’ is another act… designed to drive the stock price down to a more affordable level where pricing may be more stable and he can either sell to another entity or maybe even buy it outright to avoid all the harassment he’s been receiving.

          Honestly, we don’t know what’s going on because of all the rumors and outright opposition the company and he have been receiving. But it looks like this year will be Tesla’s true make or break time and it’s coming down to the wire.

  • avatar
    Dilrod

    Wow, what a class act. At least no one could accuse him of inflating his stock!

  • avatar
    civicjohn

    I listened to this train wreck.

    Without going into the continual debate about exactly how much cash they have (not enough), the pending debt due ($1.2 billion Q1 2019), no specifics on Model Y, Semi, or Roadster (he did say that they would need to have a new factory for Model Y, it will not be built on Model 3 chassis), I’ve been listening to earnings calls for years and this was the most dismissive one I think I’ve ever heard.

    Yep, going through the motions of quarterly reporting required of public companies is certainly a huge drain on many people, but this is where you are supposed to provide “guidance”. Telling shareholders “if they don’t like volatility, don’t own the stock” is not exactly comforting.

    Zero guidance on Semi, but including a comment about how “convoy mode” will disrupt the trucking industry, an apparent walk-back on the electricity charges the Semi owners will get, just freaking amazing.

    But, since I didn’t lose any money yesterday, it was damn funny to me.

  • avatar
    sirwired

    Clearly he’s not sleeping very well on his cot on the factory floor, because I can think of no other reason to tell the people he needs to raise capital from that inquiries on Tesla’s capital situation are “boring, boneheaded” questions.

  • avatar
    islander800

    What’s with this guy? For someone who’s supposed to be a frigging genius, he seems to think he lives entirely in a world of his own making where normal rules don’t apply. Nothing says idiot like an “entrepreneur” who thinks the way forward is to piss off the very investors he depends upon.

    Want some insight into Model 3 without the “fan press” hyperbole? Check out autoline.tv and watch their Autoline After Hours (AAH) episode of a few weeks back, “Teardown of the Model 3”. Interviewed is Sandy Monro of Monro & Associates, a firm in the business of obtaining new manufacturers’ car models and doing a complete teardown and analysis of design, materials, costs, features, etc. according to – and this is important – a completely neutral and standard set of criteria they apply to every vehicle they analyze, from Kias to Bentleys. While he was effusive about the good stuff with Model 3 (the battery packs, the electrics and electronics side of things), he was absolutely dumbfounded about the “dinosaur” side of the car’s design, meaning the traditional auto tech stuff of the vehicle. For example, they found the body structure to be the heaviest and most costly to make of any vehicle in its size class. In fact, the complexity and number of parts used in the body unibody structure had him wondering if it had been designed by someone who had never designed an auto structure before. Why, he asked, would they ignore 200 years of coach craft experience of the auto industry? He also noted, as they disassembled the vehicle, that there was plenty of evidence that assembly line training was a problem, as parts were incorrectly installed.

    All to say, the hubris of Musk is such that he thinks he knows better than everyone else how to build a car and bugger off if you disagree with him. Talking to investors like he did in the conference call shows he thinks he can rewrite the rules of Wall Street as well. Not very bright for a genius.

    • 0 avatar
      Vulpine

      “For example, they found the body structure to be the heaviest and most costly to make of any vehicle in its size class. In fact, the complexity and number of parts used in the body unibody structure had him wondering if it had been designed by someone who had never designed an auto structure before. ”

      Unless, however, you consider that the body was designed for strength, not light weight. That body was designed for specific crumple zones rather than overall light weight. Those battery packs are heavy, so not only does it have to resist impacts but it has to carry a half-ton or more of dead weight on the bottom for its entire operational life of 10 years or more (remember, the average life of a new car is 11 years, meaning these things need to be capable of 20 years before breaking their backs.) Clearly the car is “over-engineered” by modern standards but it could be that these cars are designed to last the lifetime of its owner, if not longer.

    • 0 avatar
      notwhoithink

      “What’s with this guy? For someone who’s supposed to be a frigging genius, he seems to think he lives entirely in a world of his own making where normal rules don’t apply. Nothing says idiot like an “entrepreneur” who thinks the way forward is to piss off the very investors he depends upon.”

      I don’t know…the only way he actually “depends” on these investors is if he needs to raise another round of capital. He says he doesn’t, so at this point let him say what it wants and let the market sort it out. He thinks the stock is overvalued? Yup. Maybe this correction takes it back into saner territory. If he gets Model 3 sorted out and starts seeing positive cash flow he’ll be fine. If not, then it won’t matter what he tells analysts.

      Frankly I find it refreshing. I’m sick of CEOs and CFOs of companies playing the stock market games, kow-towing to the analysts and institutional investors. When they start playing those games they get away from what their company is supposed to be doing (providing quality products and services in a way that makes money) and instead takes them down the road of financial engineering. This is the kind of short-term thinking that leads to great ideas like regular layoffs and lack of investment.

      You want to invest in my company? Great. Get on board, you can share in the profits when those days come. But don’t make the mistake of thinking that you get to call the shots, and don’t come to me bitching about share prices and dividends. I’ll run my company in the way that’s best for the company’s future and if that works out for the investor class then so be it.

      IMO, Musk and Bezos are two of the few CEOs that are actually doing it right. If you run the business in the way that is best for the company’s future then your shareholders will profit.

  • avatar
    Master Baiter

    Musk knows he’s on thin ice as CEO; that’s probably why he’s testy.

    I drove a co-worker’s Model 3 last week. The only prior experience I had driving an EV was a quick test drive in a Spark a couple of years ago.

    The acceleration off the line was phenomenal. One of my DD ICE cars is actually faster, but with no noise or shifting, the experience is surreal. I took off from a stop light on a 40 MPH speed limit boulevard, looked down and was doing 63 in what seemed like no time at all. I expected the ride to be choppy, but it wasn’t–the car is well planted and handles nicely. I’d prefer a more traditional MMI, but my co-worker has gotten used to it and has no complaints, although that could very well represent confirmation bias.

    The interior quality and fit and finish reminded me of a high-trim Accord, or perhaps an Acura TL. Not on par with Mercedes or BMW, but everyone already knows that.

    The Supercharger network is also a big plus for Tesla vis a vie other EVs on the market. My friend was able to add 50 miles of range in 6 minutes on a supercharger, which isn’t terrible.

    I’m not willing to bet my own money on Tesla’s stock or one of their cars just yet, but I wouldn’t count them out either. To my surprise, the product is pretty compelling.

  • avatar
    Asdf

    Musk is the personification of the realization that EVs are dead on arrival. Not only are they not viable on their own technological terms, with their extremely long charging times and extremely short range revealing that they are inherently defective by design, it turns out that they’re not financially viable either, not even with massive amounts of taxpayer money being thrown away on them.

    Since it turns out that Musk is unable to make EVs that have any reason to exist, he should close down Tesla. His chronic EV incompetence only reinforces the fact that the internal combustion engine is still unsurpassed.

    • 0 avatar
      SkiD666

      Dead on arrival? Might not work for everyone’s use case, but I have easily survived driving a Tesla for 3 1/2 years and 4 Canadian winters and haven’t had any issues with “extremely long” charging or “extremely short” range. The only current issue with electric vs. ICE is initial cost and that will change over time as production scales. BTW, no taxpayer money was involved in my transaction.

      • 0 avatar
        rpn453

        BEVs might not work for some, but they can be perfect for others.

        I’d be interested in hearing more about how well a Tesla – or any other BEV – handles a real winter. Where in Canada are you located?

        I’ve seen more Lotus Evoras (one) as winter vehicles than Teslas around here!

        • 0 avatar
          SCE to AUX

          I’ve described my winter experiences with a 12 Leaf here before….

          Basically, here in western PA with the old Leaf battery, I was losing up to 50% range during the coldest parts of winter. The coldest I saw was about -10F during three winters. The biggest change seemed to occur below freezing.

          There are some variables, including heater type (resistive vs heat pump), battery chemistry, cabin pre-heating and battery thermal control, but in any case winter is very hard on a BEV.

          On the plus side, a BEV warms up the cabin much faster than an ICE can.

          • 0 avatar
            mcs

            I’ve made it through 3 winters with my Leaf now. Still doing fine. This winter I made plenty of 100-mile to 100-mile+ trips. Even in the subzero F temps. On one trip, on the way back in 4 degree F temps I passed several ICE cars dead on the side of the road. I think that leg of the trip was 55 miles and I did it in a Leaf with 60k miles on the clock.

            On super cold days on more normal trips, I didn’t even pay attention to the range. The car was fine.

        • 0 avatar
          SkiD666

          Central Alberta, so not uncommon to get -30C weather in winter. When normal cars were having trouble starting in the cold, the Tesla just works, albeit with reduced range because of using the heater.

          The reduced range is a small price to pay when you get “instant” heat when it’s cold and don’t have to wait for the engine to warm up to get heat. Also don’t have to worry about CO when “preheating” or charging the car in the garage.

          Driving in ice and snow is also really good with winter tires, AWD and weight down low. Just have to be mindful of momentum when turning.

    • 0 avatar
      USAFMech

      This message brought to you by Asdf Buggy Whips and Whale Oil Supplies, Inc.

    • 0 avatar

      Who planted you here? Sergio? I’m no Musk fanboy at all, and I’d like to see that smug so-and-so do a long-overdue faceplant. But you’re wrong about the viability of electric over the long-term.

      Musk’s personality aside, my reservations go to Tesla as a car manufacturer. Maybe the Tesla brand has value as a luxury product to someone who needs it (the Chinese or French?), but mass-market vehicles? Please.

      As a battery-maker, I give Tesla credit for making a compelling IP play that Toyota, Nissan, GM, Ford, VW, et al might either buy collectively or license out through some mutually-beneficial means.

      Those batteries could be to vehicles what Intel and AMD are to the computer business. That is what Wall Street is creaming itself over, not Model 60s.

  • avatar
    tylanner

    This is more likely a Steve Jobs first stint at Apple scenario and not say….Howard Hughes and his Spruce Goose…on account of the mega factory…track record of success…an actual purveyor of rockets…

  • avatar
    Caboose

    Remember: Elon Musk isn’t like other CEOs. He’s not a pencil-pusher! No no. He’s a *visionary*!
    This is the guy who made his first money writing a video game in the pre-Nintendo days. Later, he parleyed that into merging with/buying the company that built PayPal. So that gives him great insight into the car business, right?

    He might know how to spot an opportunity and he might have a vision of some kind. But he was never a car guy. And he doesn’t build cars for car guys. He’s a flashy, self-promoting, non-car, tech guy who builds tablet-computers-on-wheels to other flashy, self-promoting non-car guys.

    In seriousness, though, maybe he has a point. He’s dismissive of analysts and of the market in general because they only look to the next quarter and to P/E ratios, while he’s trying to build something much bigger.
    He seems to think, rightly or wrongly, that *investors* should not be *flippers*, looking for the big score and then getting out. He seems to think that investors are defined (or should be defined) as “those who buy into my vision of the company and for the future”.

    • 0 avatar
      SCE to AUX

      Agreed on your last paragraph. But he could deliver the same message more tastefully.

      • 0 avatar
        highdesertcat

        Tesla is a lot like religion.

        You gotta have faith.

        • 0 avatar
          Caboose

          On the other hand, SpaceX has the same leader and had huge cash-burn in the beginning. Amazon didn’t make money for the first five years or so, right?

          Believe me, I’m not apologizing for Elon Musk, either his corporate governance or his condescension. But I don’t think he’s wrong to think that Wall Street is short-sighted by nature and that perhaps what investors want isn’t necessarily what’s best for the company.

          Would anyone here argue that what Wall Street analysts look for is consonant with a reasonable notion of “long-term vision”?

          • 0 avatar
            civicjohn

            Caboose,

            I’d buy SpaceX in a heartbeat. It kind of seems like the Tesla “crumbs” are the only access to the EM brain trust, unless you want to buy a flamethrower.

            As a person who has the time on their hands to review 10-K filings, it’s truly amazing to me how they bury the SolarCity revenues, the cost of service centers, SC networks, dealerships, dealing with the new rules about leases, etc. They lump all of that spending into one category.

            It would also be nice to know how many reservations exist, but “stupid shareholders” don’t deserve to know. Better off chatting with a rookie YouTube fanboy. He needs to stop burning the hands that feed him.

          • 0 avatar
            SPPPP

            You can certainly make the case that investors should not be “flippers”. And maybe Elon can make the case that people scared of volatility should not own Tesla stock. But couldn’t you also make the case that people scared of explaining company financials shouldn’t be running a publicly traded company?

    • 0 avatar
      Vulpine

      “He seems to think, rightly or wrongly, that *investors* should not be *flippers*, looking for the big score and then getting out. He seems to think that investors are defined (or should be defined) as “those who buy into my vision of the company and for the future”.”

      Personally, I agree with that outlook. If you make your money trading all the time or “flipping” as you describe above, then these people aren’t investors. I’d call them “traders” on a nice day and “piranha” on every other day.

  • avatar
    sportyaccordy

    There is a theory that companies with co-creators tend to do better than companies founded by single visionaries. Musk could use a conscience and a filter.

  • avatar
    healthy skeptic

    This reminds me of the documentary I saw on Enron, where the company was flying high, but trouble was on the horizon, and CEO Kenneth Lay called one of the analysts an “a**hole” on the conference call. We all know how that story turned out.

    I’m a big fan of Tesla’s cars, but wouldn’t touch the stock with a 10-ft pole.

    • 0 avatar
      jkross22

      Healthy, I think you’re spot on. Institutional investors have to be quite a bit more nervous after this call.

      Even if Musk is telling the market to go pound sand, he has to understand that his backers are the market he is ridiculing.

      Incredibly self defeating move on his part. Must be a real prince to work for.

      • 0 avatar

        I’m sure he’s no sweetheart but Tesla shouldn’t attract snowflakes either. Still, ever looked at the departure rate of his key people? It’s not pretty.

        https://www.bloombergquint.com/business/2018/03/13/tesla-treasurer-and-vp-of-finance-is-said-to-leave-the-company

        https://www.bloomberg.com/news/articles/2017-03-03/at-tesla-departures-mount-as-carmaker-stretched-to-the-limit

    • 0 avatar
      tylanner

      You think Musk is misleading investors?

      • 0 avatar
        Vulpine

        There are those who have been flat-out stating it for over a decade.

        Personally, I don’t think so. But while Musk has had a bad habit of getting his products out years later than planned in almost every case, this Model 3 ramp-up has been biting him harder than ever because the reality isn’t matching the physics on the assembly line… there’s just too much ‘bounce’ in the robot arms to get the accuracy he needs to operate at full speed. So he’s being forced to re-do part of his line to allow humans to supplement those ‘bots for better control and speed.

    • 0 avatar
      twincamry

      Yup; that was the first thought I had as well. Enron: The Smartest Guys in the Room. Great film. The situation might have been slightly different but it felt the same in ways.

      Here is a clip of that from the film of Jeffrey Skilling saying that for reference:
      https://youtu.be/FSK0v0vTgXA

    • 0 avatar
      dukeisduke

      Kenneth Lay and Jeff Skilling destroyed Enron. It started out as the merger of two companies (Houston Natural Gas, and InterNorth) that produced real products and services. Lay and Skilling, along with Andrew Fastow, moved into the investment and hedge fund business, then eventually turned it into a house of cards. A disaster for the investors, and all the people that lost their jobs.

  • avatar
    Vulpine

    Now, whether or not you agree with what Musk did, you have to keep in mind that Musk has been the butt of a lot of bad sentiment by analysts for over 15 years at Tesla. He’s been under a lot of stress and to be quite blunt I wouldn’t be surprised if he isn’t on the verge of a breakdown simply because the Model 3 assembly ramp hasn’t gone as well as he had hoped. Every time he seems to make a step forward, something happens to drive him backwards and sometimes those events seem too well timed to be coincidental. Worse, everybody has been harping on him about financials, distracting him when he’s trying to get a product running. Hell, I’d be bloomin’ short with them too! Any of us would if our minds are locked on real, physical problems and someone tries to divert the talk to something that… to be quite honest, may not matter IF he can get that line running at full speed.

    Tesla has the potential, still, to blow the EV market wide open with the first, reasonably affordable, long-range EV with high-end performance capabilities. But if Musk ends up blowing his top… we could see the whole EV movement collapse and I, for one, am strongly opposed to that outcome.

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