TSLA Market Action: 2018 Investor Roundtable

[neroden]

. The company is definitely doing fine, but the CEO is not.

I think this is true.

I do hope this forces TSLA board to rethink hiring a COO to help.

Who are they going to find? I mean, seriously, I think they've been looking for that for years, maybe not super actively, but looking. The operations part is the awful part with Tesla -- who are you going to get to walk into that punishingly difficult job, working 80 hours a week, with Musk as their boss looking critically over their shoulder? Morton decided he couldn't handle being CAO in that work environment. Gwynne Shotwell is pretty special -- but I don't think even she would volunteer to be Tesla COO.

Maybe it would be easier to put together an operating *committee* to spread the workload. The Board has a few people who could step in personally to manage parts of the corporate operations, but not many. Some of the existing execs could pick up parts of it. Filling some of the vacant spots would certainly help, but to do so they're going to have to figure out how to make those jobs *not* 80-hour workweeks. Musk has to let go of some stuff and delegate it permanently...

I also hope his good friends get him some professional help

He needs to sleep more. Through safe means. Massage, hot tub, exercise.

Until then, I am out of the stock because I cannot tell how much $TSLA value is built into Musk vs Tesla.

Frankly I think it's mostly Tesla, so I'm still bullish, but who knows, I could be wrong.

 

[neroden]

I would like to think once we get some green bars on the quarterly profits chart, that things might begin to calm a little and more thought can be given towards structuring things a bit better.

This absolutely makes sense and I hope so.

 

[RobStark]

The CFO (not accountant) resigning is a reminder of prior corporate fraud cases,
By implication that association or perception hurts Tesla.

The accountant did explicitly say that was not the case.

The CFO did not resign.

Deepak Ahuja is still very much the CFO of Tesla Inc.

 

[neroden]

don't feel sorry for me, I'm still up for the year. feel sorry for yourself. you may possibly get your money back after Q3/Q4 results.
I am just staying out for now because I think something is wrong with Elon's mental health. I hope I'm wrong.

Oh, it's stress-related illness. Isn't that obvious? Musk even said so and said the next 3-6 months were going to be the worst for him (probably because the disinformation and smear campaign will be ramped up to 11 until the company is paying off its March bonds).

 

[bdy0627]

Go to 1:19 (1 hour, 19 minutes).

This is why we invest in Tesla. The priorities of Elon are clear and his motivation is pure and strong. If you don’t feel his love for humanity here, and his desire to make Tesla great, you got some issues.

Wow! Thanks for pointing out that segment. I haven't found the time to watch the interview and I probably won't watch it all, but it was helpful to see that part. I gotta admit, my throat got a little lumpy just watching and listening to Elon. You can really see how intensely emotional he is right now. I feel bad for him. He's got an awful lot on his plate, can't seem to sleep much, works massively long hours, recently endured another breakup, doesn't seem to have much time for friends or family right now, and on top of all of that, he is under intense scrutiny for his behavior recently. I sure hope for his sake, and our sake, that Q3 turns out well, and we can all put this ugly chapter behind us. For the record, after today's dip, I am totally out of powder and even tapped our HELOC for some additional funds.

This dip in combination with the last one is now officially making me feel some serious anxiety. I have found in the past, that usually happens near the bottom. Just for fun, I went back through all of the dips and climbs since 2014. I specifically looked at the combination of a dip, the following climb, and then the next dip. We are in a rare spot here with the 2nd worst such period. The worst one was in early 2016, as most can probably guess, that resulted in an overall drop of -38.5%. That included a 10.1% dip followed by a 13.6% climb, and then the brutal 42% drop. After that one, we climbed over 90%.

In our current scenario, we had the 25.6% dip from $387, followed by a 13.5% climb to $327, and then the dip of 22.9% to $252 that we are in now, for an overall drop of 35% over the period. As bad as that time was in early 2016, we are within about 3% of it here.

 

[UnknownSoldier]

The CFO did not resign.

Deepak Ahuja is still very much the CFO of Tesla Inc.

The fact that no one else wanted to be CFO and Ahuja came back after retiring is still concerning to me.
Elon needs a good set of Chief _______ Officers around him. He's been doing it all himself for over a decade now and it's not clear how much longer he can go on doing it. This last year has taken a vast toll on him.

 

[omarsultan]

It's because the workplace environment is verging on toxic, with everyone expected to work 80-hour weeks and massive internal disorganization to deal with. I'm a bull, and I can tell you that that's quite clear. I mean, Mr. Morton pretty much says it outright -- "pace" is a polite way to put it.

The thing is, the financial situation is great. Employee retention? That's more of a problem.

Maybe its because I live in this neck of the woods, but I read that and think, "yup, sounds like any startup". I have gone through it and have friends that a have gone through it. Some folks thrive in that environment and others are not cut our for its--no judgement in that, different folks want different things in life. I wonder if SpaceX is really any different. I would guess not, but there is not a whole cottage industry trying to trash SpaceX for financial gain, so its not on the media radar.

 

[beachbum77]

I guess we might just have different PoV on Tesla's end game. I think for Tesla to meet Elon's goal, its not just about dominating the EV space, which is a niche which I think the incumbents are happy to cede to Tesla. Rather, I think the goal is to attack the mainstream ICE market and take away ICE sales as the lever to force incumbent manufacturers to introduce compelling EVs as part fo their portfolio.

In my mind, the long-term risk is if incumbents aim to be just successful enough to deny Tesla oxygen but at the same time, never fully commit to sustainable transport and undermining their core business. Once Tesla is marginalized or eliminated, they can revert to their usual ways.

To achieve what you suggest will take a battery pack and drive system that costs 1/2 or 1/3 what it costs today. That will be the only way to draw large numbers of buyers to make the switch. Even matching the cost of ICE will not be enough. Getting people to make a big change in their habits can be very tough. Humans are very much creatures of habit.

An extreme example I read about recently was a small diner in New England that made the switch from wavy-cut french fries to straight cut fries because the only blades they could buy were flimsy, kept breaking, were expensive, and the owners insisted on using fresh potatoes. Their loyal customers went berserk up to and including boycotts and death threats over this simple change according to the news reports. So good luck getting the masses to make the BEV switch in short order. A certain percentage of the population is always ready for something new, better, or different. The rest...not so much.

 

[Joe F]

Tesla Erupts in Chaos After Senior Execs Leave, Musk Tokes Up

"Erupts in chaos"? Who is writing this stuff? lol

Dana Hull for Bloomberg. She's rarely fair to Tesla IMHO in anything I've read of her Twitter posts.

 

[neroden]

Boomer, I agree with everything you wrote except David Morton. He came in at a salary of $350k, but was also granted a $10 million equity grant payable in 4 years. The man is an accountant. The only way you walk away from that kind of money is if you a) hit the lottery b) find a beautiful, single, rich heiress to marry you, or c) realize the odds of the grant being worth staying around for 4 years are very slim.

Bullshit, Donn. You're the sort of person who thinks money is the only thing that matters, I guess. You're wrong, as many rich people will tell you.

Dave Morton's already rich. (Do you know how much he took home from Seagate? Me neither, but millions.) The way you walk away from another $10 million is if (a) you're already rich and don't have to work -- you've got $10 million already, and (b) the work environment is sufficiently unpleasant and all-consuming that you decide your life's worth more than money.

Sadly we have solid evidence that Tesla makes it hard for its top execs to have a life. (What does JB Straubel do in his spare time? Researches batteries, apparently.) Even Deepak Ahuja needed a break, though he came back.

Morton outright told us why he left. Believe it, and take it seriously. It does indicate a real problem at Tesla, and one for which there is mounting evidence. Musk doesn't even seem to entirely understand that the punishing workloads are a problem.

While he has no "disagreements" with Tesla's financial reporting he seemingly did not like what he saw ahead.

Like not seeing his wife and kids for 4 years while reading smears about his company in the press continuously and having his every action questioned. Yeah, he didn't like what he saw ahead.

The financials are fine.

 

[UnknownSoldier]

Maybe its because I live in this neck of the woods, but I read that and think, "yup, sounds like any startup". I have gone through it and have friends that a have gone through it. Some folks thrive in that environment and others are not cut our for its--no judgement in that, different folks want different things in life. I wonder if SpaceX is really any different. I would guess not, but there is not a whole cottage industry trying to trash SpaceX for financial gain, so its not on the media radar.

Tesla is a 15-year old company which recently hit a $50 billion market valuation before sliding back. It's not a startup anymore. The transition from startup to mature company happens with every successful company. It's really far past the time when Tesla should have begun the transition now. If Q3/Q4 prove to be profitable and going forward there is going to continue to be sustainable profitability, a complete shakeup of the whole management structure needs to occur. I think the time is long past where Elon needs to do everything himself. Steve Jobs had Tim Cook and Jony Ive and a lot of other people supporting him and letting him focus on what he thought was important.

 

[Ludalicious]

I quoted the stock to get too mid 2s a while ago. followed by allot of dislikes. Also said after the original tweet that funding secured could get him in trouble if not true. Followed by more dislikes. I am still waiting to see how this Elon thing pans out. Tesla without Elon isn't the same company at all. For the good or worse we will eventually find out. That is unless Elon is always around. I for one hope he is.

Either way Tesla as a company is succeeding and I hope to jump in prior to Q4 stats. Because I feel after those numbers are calculated the stocks are going to go up dramatically.

Ok, so thanks for the reminder of what has not happened yet and may not happen.

 

[dondy]

It is much worse, anybody known to work for Tesla is bombarded with "requests to comment"

I guess we might just have different PoV on Tesla's end game. I think for Tesla to meet Elon's goal, its not just about dominating the EV space, which is a niche which I think the incumbents are happy to cede to Tesla. Rather, I think the goal is to attack the mainstream ICE market and take away ICE sales as the lever to force incumbent manufacturers to introduce compelling EVs as part fo their portfolio.

In my mind, the long-term risk is if incumbents aim to be just successful enough to deny Tesla oxygen but at the same time, never fully commit to sustainable transport and undermining their core business. Once Tesla is marginalized or eliminated, they can revert to their usual ways.

Their investments in battery production are real, beside corporations you have very significant (at least in Germany, the Netherlands and Sweden) state research and production programs.
Musk was very clear about his goal:
"The reason I put so much money into the creation of Tesla was to be a catalyst in the electric car revolution."
Electrical revolution is started. I don't know about USA but in Europe all companies started transformation to electric in 2016-2017.

He was persuaded to stay as active CEO with the big carrot of extra money for his Mars project. The Wall Street is very clear that they have their opinion. It's not about EV vs. ICE it is about California vs. NY.

 

[neroden]

I don’t know what the real reason is, but the official explanation is not credible.

The official explanation is extremely credible. It's couched in polite corporate-speak, but "pace" means "They wanted me to work 100-hour weeks" and "public attention" means "I'm going to be constantly accused in the media of committing fraud regardless of how careful I am", and seriously, of course anyone who wants to have a life would bail out.

 

[neroden]

I'm making the assumption that II's are long term holders. Then, with less II's, then there's a lot more retail ownership, which would be open to trading.

I won't answer your primary question, I'll just say these are bad assumptions. I think retail holders tend to be long-termers -- and I know around half of institutional investors are totally short-term traders.

 

[ZachF]

To achieve what you suggest will take a battery pack and drive system that costs 1/2 or 1/3 what it costs today. That will be the only way to draw large numbers of buyers to make the switch. Even matching the cost of ICE will not be enough. Getting people to make a big change in their habits can be very tough. Humans are very much creatures of habit.

An extreme example I read about recently was a small diner in New England that made the switch from wavy-cut french fries to straight cut fries because the only blades they could buy were flimsy, kept breaking, were expensive, and the owners insisted on using fresh potatoes. Their loyal customers went berserk up to and including boycotts and death threats over this simple change according to the news reports. So good luck getting the masses to make the BEV switch in short order. A certain percentage of the population is always ready for something new, better, or different. The rest...not so much.

This is part of the reason I am bullish on Tesla.

Many companies get stuck/shoehorned into various architectures/practices by their loyal customers and often when the market changes to make those unfavorable they have a hard time changing to accommodate. They piss off their loyal customers faster than they can bring over new ones, even though the old way of doing things is no longer economical.

Harley Davidson brand is a big V-twin engine... Anything else isnt a "Real Harley"
Porsche brand is rear engine.... Anything else isn't a "Real Porsche"
Real muscle cars a F/R OHV V-8s.
etc, etc...

Tesla has a clear branding advantage in the EV space. It's current brand value is not boxed in to potentially long-term uncompetitive product lines.

 

[MarcusMaximus]

To achieve what you suggest will take a battery pack and drive system that costs 1/2 or 1/3 what it costs today. That will be the only way to draw large numbers of buyers to make the switch. Even matching the cost of ICE will not be enough. Getting people to make a big change in their habits can be very tough. Humans are very much creatures of habit

This is true with a (major) caveat. That's the way to achieve what's suggested in, say, the next year or couple years. People don't like rapid change, but this is happening both slowly from an overall societal perspective and extremely rapidly from a Tesla's ability to scale production perspective. So long as that continues to be the case, and Tesla continues to expand their production as they have for the last ~decade, that's not a problem.

 

[mongo]

Tesla is a 15-year old company which recently hit a $50 billion market valuation before sliding back. It's not a startup anymore. The transition from startup to mature company happens with every successful company. It's really far past the time when Tesla should have begun the transition now. If Q3/Q4 prove to be profitable and going forward there is going to continue to be sustainable profitability, a complete shakeup of the whole management structure needs to occur. I think the time is long past where Elon needs to do everything himself. Steve Jobs had Tim Cook and Jony Ive and a lot of other people supporting him and letting him focus on what he thought was important.

Startups are growth companies. Tesla is a growth company, now, and for the foreseeable future. Tesla is not a mature/ stable company (beyond hopefully being continually profitable going forward).
To accomplish all that Elon is aiming for requires effort. That effort can come either though higher numbers of people, higher hours per person, or a combination thereof. Elon can't clone himself, so he increases his hours. Any additional work he crams in speeds the progress.

 

[neroden]

Here is the operative phrase to focus on. I know someone who worked with Elon in his earlier company but decided to not join him in Tesla. I earlier wrote about EM not believing in work-life balance. It wasn't a joke - having EM's staff meetings on weekends is not something everyone likes.

This is correct, and I think it's frankly a huge problem for the company. Because, frankly, Musk is *wrong* about not believing in work-life balance. And Tesla will have problems with employee retention until he realizes that. (That said, lack of work-life balance is now damaging *Musk* too... maybe he'll figure it out...)

Irrespective of the payout. BTW, $10M is probably not a big deal for a CAO. He can get that somewhere else without working 24/7. Heck, I've no way of making that kind of money but even I'd refuse that kind of work.

Ditto.

as well as the pace within the company

ps : BTW, extreme pressure and high demand is not peculiar to EM. Many superstar CEOs (like Gates and Job) are absolutely horrible to work for.

 

[neroden]

Seriously undercuts the shorts' explanation. Basically, he didn't like being ignored, and decided that this was not the job for him.

I can already tell him one of the reasons he was ignored:



The guy should have listened to at least one conference call to understand how adamant Tesla is about not raising further capital through dilution. Going private was never about "capitalizing the company", the whole purpose was to be a private company. It was an end, not a means.

I don't think he understood what he was hired for.

Good point. He needed to suggest other ways for Tesla to get off of the stock market (delisting) while retaining existing stockholders (it's a hard, if not insoluble problem).