Elon Musk has defended his handling of an earnings call on Wednesday, which drew criticism after the Tesla CEO cut off questions from industry analysts.
The billionaire branded one industry analyst a ‘boring bonehead’ while claiming another’s ‘questions are so dry they are killing me’, during the bizarre session.
Taking to Twitter today, Musk claimed that the Wall Street financial experts ‘were trying to justify their Tesla short thesis.’
His comments suggest he believes the analysts in question have a vested interest in the firm’s share price going down, due to a financial strategy known as short selling.
Musk warned that people betting against Tesla will face a ‘next level short burn of the century’, suggesting the strategy will backfire.
Financial markets reacted sharply to the exchange with a nosedive in the business’ shares, which fell by 7.9 per cent at their lowest point to $277.49 (£205).
The total taken off the company’s market valuation at this point on Thursday was $3.7bn (£2.75bn).
Prices have since recovered slightly to around $283 (£210) before markets opened today, with Musk confident that this upward trend will continue.
Elon Musk has defended his handling of an earnings call yesterday, which drew criticism after the Tesla CEO cut off questions from industry analysts. During the strange session, the billionaire branded one industry analyst a ‘boring bonehead’
Taking to Twitter today, Musk claimed that the Wall Street financial experts ‘were trying to justify their Tesla short thesis’. Musk also seemed to admit some fault, adding: ‘Once they were on the call, I should have answered their questions live. It was foolish of me to ignore them’
Musk cut off analysts Joseph Spak, of RBC Capital Markets, and Toni Sacconaghi, of Bernstein during the earnings call on Thuresday.
Posting on Twitter, Musk said: ‘The “dry” questions were not asked by investors, but rather by two sell-side analysts who were trying to justify their Tesla short thesis. They are actually on the *opposite* side of investors.’
Musk did appear to hold his hands up to his part in the exchange, however.
After one Twitter user suggested that blocking analysts who are likely to be negative would fix his problems, Musk replied: ‘True. And once they were on the call, I should have answered their questions live. It was foolish of me to ignore them.’
Musk then expanded on his thoughts, adding: ‘First, it’s important to know that Tesla is the most shorted (meaning most bet against) stock on the market & has been for a while.
Musk prefaced a long thread dealing with the fallout from the situation by saying ‘please ignore this thread unless you’re interested in a tedious discussion about Tesla stock’
Musk expanded on his thoughts, Tweeting: ‘First, it’s important to know that Tesla is the most shorted (meaning most bet against) stock on the market & has been for a while’
Musk also said: ‘The 2 questioners I ignored on the Q1 call are sell-side analysts who represent a short seller thesis, not investors’
‘The reason the Bernstein question about CapEx was boneheaded was that it had already been answered in the headline of the Q1 newsletter he received beforehand, along with details in the body of the letter.
‘Reason RBC question about Model 3 demand is absurd is that Tesla has roughly half a million reservations, despite no advertising & no cars in showrooms.’
Musk further joked that ‘Flamethrowers should arrive just in time’ to burn short sellers, who bet on the firm’s value declining.
The veiled threat is a reference to flamethrowers sold by his Boring Company, during a fundraising drive.
Musk is known for his outspoken views on a range of subjects, but his candour cost Tesla $2 billion (£1.47bn) overnight Wednesday into Thursday.
Musk added: ‘The reason the Bernstein question about CapEx was boneheaded was that it had already been answered in the headline of the Q1 newsletter he received beforehand, along with details in the body of the letter’
He also said: ‘Reason RBC question about Model 3 demand is absurd is that Tesla has roughly half a million reservations, despite no advertising & no cars in showrooms’
Musk warned that people betting against Tesla will face a ‘next level short burn of the century’, suggesting the strategy will backfire. Musk further joked that ‘Flamethrowers should arrive just in time’ to burn short sellers, who bet on the firm’s value declining
Musk ended the discussion by saying: ‘It will be next level. These are really big numbers’
That’s the total wiped off the electric vehicle company’s market value, seemingly in response to the CEO’s rude attitude during the quarterly earnings call.
Tesla’s total market capitalisation – its total share value multiplied by shares held – was $51.3 billion (£37.7bn) at the close of the Nasdaq stock exchange.
His lack of respect for the participants looks to led to a five per cent nosedive in the business’ shares after trading closed.
Share prices continued to drop from a closing price of $301.15 (£221.50) on Wednesday to a low of $277.49 (£205) on Thursday.
Prices have fluctuated since, reaching a high of $288.04 (£213) yesterday.
Financial markets reacted sharply to the exchange with a nosedive in the business’ shares, which fell by 7.9 per cent at their lowest point to $277.49 (£205) on Thursday. The total taken off the company’s market valuation at this point was $3.7bn (£2.75bn)
A number of unusual moments took place during the teleconference call, held by the South African born entrepreneur in California.
His ‘bonehead’ comments were in response to money management firm Bernstein’s senior analyst Toni Sacconaghi, who questioned the amount of capital being spent on the upcoming Tesla 3.
Musk said: ‘Excuse me. Next. Boring, bonehead questions are not cool. Next?’
When Joseph Spak, an analyst from RBC Capital Markets posed a question about demand for the Model 3, Musk reportedly paused for 15 seconds, before adding: ‘These questions are so dry. They’re killing me.’
Mr Sacconaghi wrote in a note on Thursday that ‘we do worry that such theatrics will unnecessarily undermine investor confidence in Tesla’s outlook.’
Musk later gave the floor to Galileo Russell, host of YouTube channnel HyperChange TV, which has around 9,300 subscribers.
Mr Russel asked a series of questions of Musk and other senior Tesla executives, which lasted 20 minutes, before Musk thanked him for the ‘great questions.’
The bizarre session led to a five per cent nosedive in the business’ shares overnight Wednesday into Thursday, with prices continuing to drop before starting to recover slightly
The financial impact of Musk’s attitude is particularly noticeable, given that Tesla had just posted its biggest-ever quarterly loss with little reaction from markets. This graph shows the share price history of Tesla over the past 12 months
During the call Musk, who is also CEO of aerospace firm SpaceX and brain augmentation startup Neuralink, admonished the press for its handling of crashes involving Teslas on autopilot mode.
According to a transcript of the call, Musk added: ‘It’s really incredibly irresponsible of any journalists with integrity to write an article that would lead people to believe that autonomy is less safe.
‘Because people might actually turn it off, and then die. So, anyway, I’m very upset by this.’
Towards the end of the call, Musk was particularly blunt with with Robert W Baird & Co analyst Ben Kallo.
He encouraged the CEO to give more updates on the Model 3 to boost the firm’s stock value.
In response to his question, Musk said: ‘I think that if people are concerned about volatility, they should definitely not buy our stock.
‘I’m not here to convince you to buy our stock. Do not buy it if volatility is scary. There you go.’
The financial impact of Musk’s attitude is particularly noticeable, given that Tesla had just posted its biggest-ever quarterly loss with little reaction from markets.
Tesla reported a record loss of $709.6 million (£522m), or $4.19 (£3) per share, for the first quarter ended March 31, compared with a loss of $330.3 million (£243m), or $2.04 (£1.50) per share, a year earlier.
Excluding items, Tesla had a loss of $3.35 (£2.45) per share. Analysts had expected a loss of $3.58 (£2.63) per share.
The company said it ended the quarter with $3.2 billion (£2.3bn) in cash after spending $655.7 million (£483m) in quarterly capital expenses.
Musk’s ability to run Tesla is crucial as the company strives to efficiently and profitably build its first vehicle intended to be produced at high volume, the Model 3.
Tesla added on Wednesday that it is standing by its production targets for the Model 3, assuring investors that its key new vehicle was on track, after months of what Musk has called ‘production hell’
Musk acknowledged error recently in over-automating the Model 3 assembly-line, which has resulted in production delays, but it is still unclear how long and costly it will be to unwind this mistake.
A lack of Model 3 revenue has also exacerbated Tesla’s cash burn as the company continues to spend on its assembly line and prepares for new investments on multiple projects in the pipeline, such as the Model Y crossover and its Gigafactory.
The Model Y is just one of many projects in the pipeline for Tesla, which also launched a Tesla Semi and a new Roadster in recent months.
In answering questions from Mr Russell, Musk also revealed that Model Y production is not expected to begin for another two years. He also noted that the car won’t be produced at Tesla’s main factory in Fremont, California.
Musk said: ‘We will not be starting production of the Model Y at the end of next year.
‘It’s probably closer to 24 months from now, 2020… We could not fit the Model Y production at Fremont. We’re jammed to the gills here. One thing I know for sure is it’s not here.’
Musk did say that the firm is standing by its production targets for the Model, assuring investors that its key new vehicle was on track.
The company also sought to downplay increased wariness over its finances, saying it expected to achieve net profit in both its third and fourth quarters.
Over the last few months, the Model 3 has been caught up in what Musk has referred to as ‘production hell,’ with numerous delays that have forced the firm to adjust its initial goals.
The company has now warned it will shut down production for about ten days during the second quarter of 2018, including its most recent stoppage in April.
That temporary shutdown underscores how Tesla’s assembly line still needs work to produce its goal of 5,000 Model 3 vehicles per week by the end of June.
‘We have largely overcome this bottleneck,’ wrote company in a release, referring to the manufacturing issues that have plagued the Model 3 battery module line at the Nevada Gigafactory.
Tesla said it produced 2,270 Model 3s per week in the last week of April, up from 2,250 in the second week of the month.
It said the net reservations for the Model 3, including configured orders not yet delivered, exceeded 450,000 at the end of the first quarter.
Tesla built only 2,425 Model 3s in its fourth quarter of 2017.
Tesla’s capital expenditures declined in the first quarter of this year and the company cut its spending forecasts for 2018, saying it would spend less than $3 billion (£2.21bn). Tesla spent $3.4 billion in 2017.
Investing.com analyst Clement Thibault said the reduction was noteworthy, ‘but in the long run given challenges that lay ahead of Tesla, I don’t think it is going to make or break the company.
‘Tesla is definitely not in a minimizing cost stage.’
Free cash flow, a key metric of financial health, widened to negative $1 billion (negative £740m) in the first quarter from negative $277 million (negative £204m) in the fourth quarter, excluding costs of systems for its solar business.
Analysts had not expected so much spending, predicting hundreds of millions of dollars less in so-called cash burn, according to Thomson Reuters data.
Tesla did not break out a cash flow calculation that it had included in previous quarters.