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Tesla’s Conference Call Smelled a Little Musky

Tesla’s recent quarterly conference call set the internet ablaze after the company’s founder, Elon Musk, complained about dry, boring questions from short-selling analysts. He said they were “killing him,” and he even threatened to take questions from YouTube!

The tough-guy attitude did not go over as he probably hoped.

The stock got hit hard, and $2 billion in market value was immediately erased. But the biggest laugher wasn’t even Musk’s performance on the call. Try this one: The company lost a record amount of money, an amount which nonetheless was better than expected.

That’s how counterintuitive the Tesla situation is at the moment.

The stock has rallied and recovered its losses. However, Musk is at it again, tweeting/promising/threatening a “short burn of the century coming soon”.

A little personality can go a long way, but ranting on Twitter against short-sellers is a far bigger red flag for me than expressing a lack of interest about a couple of questions on a conference call. It’s not a good look, and it’s disrespectful to shareholders and, more importantly, debt holders.

Frankly, if you don’t like to deal with quarterly conference calls, then don’t be a public company. Or, better yet, have someone else do that function. Steve Jobs was way too busy changing the world to deal with financial analysts. Apple CFO Fred Anderson conducted the calls.

I’ve listened in on more investment calls than I can count, and Musk’s attitude isn’t even close to the worst I’ve ever experienced. That prize goes to Jeff Skilling, the president of Enron, who once called an analyst an “asshole” when he was quizzed on why the company couldn’t produce a balance sheet with its quarterly financials.

We know how that ended.

A few months later, Enron rolled over, went bankrupt, and wiped out tens of billions of dollars of perceived wealth. And a few executives landed in jail.

Do I think Tesla will go bankrupt or Elon Musk will become a convicted felon because he doesn’t hide his dislike of analysts? No, probably not.

However, such an attitude shows a lot of arrogance at a time when the company faces loads of competition. Jaguar, Mercedes, Porsche, and BMW will all have premium offerings in Tesla’s arena within the next year or two. The window of opportunity for Tesla is small, and it’s closing.

Good stewards of capital don’t pick fights with short-sellers. Neither do they call analysts seven-letter words.

Instead, they focus on moving forward, deploying capital profitably, returning capital to shareholders when needed, and navigating the bumps in the road that all companies face.

While Tesla’s stock is back up in the short term, this sort of behavior is a long-term warning sign to watch closely. The real bozos in this situation might be the debtholders. They’re loaning this company beaucoup bucks at interest rates that don’t nearly justify the risks.

When Musk comes back into the market for ever more billions of dollars to plug the holes in his leaking ship, I’m sure his attitude will be much nicer. Hell, Tesla might even be a big winner from here on out.

But let’s face it. There are thousands of stocks to invest in, more than a few of them are winners, and there’s no need to entrust your money to someone who has no respect for you.

Good investing,

John


John Del Vecchio

About John Del Vecchio Author of Rule of 72: How to Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio, John is a forensic accountant at heart. Standing on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, he built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around. John graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.

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