Finance is unique and advantaged in that it is the only profession that aims to make money on money. It touches nearly every other industry and I love that about it. While I do believe finance overall helps make the economy operate more efficiently, sometimes, I think we go too far.
And, that’s what I would like to address in this note.
Tesla Earnings
A few days ago, I had the pleasure of listening to Elon Musk hold his earnings call for Tesla. And I heard a handful of rude analysts on the call. While the company did disappoint investors with another quarter of losses, there were many things to celebrate and applaud on behalf of Tesla and its leadership. After all, according to legendary investors like Peter Lynch and Mr. Buffett, one does not invest for the quarter, one invests for the long-term.
Now, even though I’m not a shareholder (aside from the occasional dabbling in options), I can empathize with struggles of running a company, participating in capital markets, and answering to finreg. Believe me, it’s a constant source of stress to feel like you need to watch what you need to say in financial markets. Couple that with running two world-changing companies, no wonder his behavior seems erratic doing what he can to hold it together. Striving for the American Dream is messy, stressful, soul-crushing work.
Why we should care
I can only imagine what that pressure is like at his scale and influence. Trying to manage two colossal companies and simultaneously wanting to take the company private and release it from the cross-hairs of short-selling and public markets. To manage Tesla, SpaceX, while tiptoeing around regulations to prevent the destruction of free speech in financial markets. Smashing the glass ceiling in energy and space markets. That’s a heavy load and he deserves some praise, my colleagues.
A lot of financial professionals know that the Tesla stock is one of the most shorted stocks (meaning: a bet against the company). Yet, the majority of society does not and they are listening to a version of the Tesla story that might not be entirely true because it tends to amplify one side.
So, let’s make sure we have a well-rounded discussion of what is happening because most of the headlines I’m reading (coincidentally tied into the ticker via online brokerage accounts) are falling short of telling the full story. Here are some of the positives I took away from the Tesla call:
- Elon stated that Tesla is now the best selling pre-owned car in the US and that there were zero predictions of this happening 5 or 6 years ago
- Tesla is now the fastest selling used luxury car, beating out Audi
- In Norway, Switzerland, and the Netherlands, Tesla was the top-selling car in March
- A Tesla just drove from the Bay Area to LA on a single battery charge
- In North America, Model 3 was yet again the best-selling mid-sized premium sedan, selling 60% more units than the runner up
- April was the largest delivery month in history, and that most of those were in the final 10 days of the quarter
- The Tesla trucks are seeing “quite amazing success” and they used them to deliver some Model S vehicles
- Tesla will launch an insurance product next month
- Tesla raised $500m in China for Shanghai Gigafactory
- Tesla’s battery storage wall is growing and is going to become a larger percentage of the company’s business over time
- It seems Elon is hyperfocused on operational/capital efficiencies and said something to the tune of: “raising capital shouldn’t be a substitute for operating a company more effectively” (take note, Lyft)
- Elon also in reference to capital: “it is healthy to be on a spartan diet for a while”
- Oppenheimer (with one of the highest price targets on Wall Street) asked a really interesting question about chemistry developments with battery technology which Elon declined to answer
Trading Tesla
In regards to the stock, Elon mentioned that Warren Buffett once said having a public company is like owning a house and having a realtor on your lawn every day shouting the market price at you. The house never changes, it’s just how the realtor is sizing it up that day. Imagine how distracting that is for him.
What I think we have to remember is that we are lucky to even place bets on any of Elon’s companies in an attempt to generate alpha. We tend to place a spotlight on the bad instead of the good – this is happening in politics, it’s happening in social relationships, and now it’s happening in finance. Elon Musk is a true American hero. He looks to the future in time and space to bring dreams of a better world to reality. He is above traditional financial valuation in a sense.
After listening to his earnings call and observing all the Teslas driving around here in Southern California, I’m bullish on the future for Tesla and hoping some financial institution helps take Tesla private and Elon never has to deal with equity analysts and the overreaching steps of regulators again. He has too important a mission for humanity to be dealing with this betting against him.
Also, I hope this note serves as another view of the earnings call – after all, there was not one female analyst that asked a question – in fact, no female voice on the call except for the moderator. Let’s broaden our view, finance, and try to see all sides of the story.
Here’s to you, Elon.
