Published on May 6th, 2018 | by Zachary Shahan0
Elon Slows Tesla Down … To Cut Out The Financial Trolls
May 6th, 2018 by Zachary Shahan
Maarten just wrote an epic piece on Elon Musk’s apparent decision to drop Wall Street and drop a beat on the world via a more enlightened, independent, inspired, societally beneficial, long-term corporate approach than we are used to seeing — even from Tesla.
He wrote a similarly epic piece on what is coming for TSLA shorts: “Stormy Weather In Shortville Will Soon Look Like Day On The Beach (Epic TSLA Tsunami Coming).”
Before adding some notes about something I sensed on the conference call, I want to summarize some of Maarten’s brilliant points in other words since they bear repeating and emphasizing:
Wall Street likes to play games, often without a conscience, and the big wigs generally get away with it because they hold the purse strings.
Tesla got itself into a little bit of a scenario with Wall Street. There was such an insane amount of demand for the Model 3 that Tesla decided to quite significantly speed up its growth plans, which meant raising money to finance faster growth than Tesla could finance via its own revenue/cash flow.
Presumably, that relationship started out well. Wall Street saw the insane consumer demand and was more than happy to throw over some cash. Tesla/Elon figured the fat cats could play nicely if they saw consumer demand, real product value, and a company with vision & soul.
Alas, Wall Street isn’t known for its high moral qualities, and some of the money managers proved the stereotype too true. Tesla has faced insane short pressure — for years, but getting particularly dramatic in the past month — and it often gets smeared if not punished for doing exactly what it’s supposed to be doing. That is, for trying to ramp up production and grow as quickly as possible.
Perhaps some of these shorts are idiots. Others are apparently trying to use their money + misleading, easy-to-sell narratives about Tesla’s “cash burn” and “fatal inability to survive on its own two feet” in order to make money off of people with little faith who haven’t put in the time or concentration to truly understand Tesla’s fundamentals.
With a few helpings of bad news — or news that can be twisted to look bad — those shorts could be making a fortune. However, they must also know that if Tesla gets Model 3 production going well and starts turning a profit, they are absolutely screwed. (Note: Tesla is apparently on the verge of getting Model 3 production to the point where everything looks much rosier on Tesla’s balance sheet. Elon, knowing what’s up probably better than anyone — though, Deepak Ahuja seems to have a good eye on the story — and has been confident enough that he has gone right ahead and told everyone Tesla will show a profit in Q3 or Q4.)
The shorts are a stubborn bunch. Rather than get out and find another company to pester, they seem to be holding out hope that the Tesla world will come crashing to the ground any day now.
Elon seems to be sick and tired of this game. I imagine that, in an ideal world, he’d rather go for breakneck, all-hands-on-deck, rocketing growth that uses support from the financial markets. But seeing what a distraction they are, and what a pain in the ass it is having to deal with dishonest, boring, apparently immoral societal leeches, my understanding is that he has resigned himself to somewhat slower growth that doesn’t rely on borrowing more money from that sector of the modern business world.
(I think that covers Maarten’s narrative well in a different style and format, but he or others can jump in and comment if it seems I’m off the beat.)
After the conference call, I came out and said that I did think his responses to some of these financial pests were delivered in bad form and threatened the company’s brand. Maybe I was wrong. Maybe the retorts could have been delivered in a better way. Or maybe this is just what was needed. It seemed clear to everyone who listened to the conference call this week that Elon was tired, and it was easy to jump to the conclusion that fatigue and lack of patience led to a counterproductive call, but maybe the lack of patience that resulted was a good thing in that it pushed him to just cut through the crap — more than usual.
Aside from the outbursts about the boring questions (covered well by Maarten and Kurt and hopefully by me again above), there was a segment toward the end that really jumped out to me. Seemingly sinking down under a body of water and letting years of attacks show, Elon said, “Our focus is on the Model 3. We need to get that to above 5,000 a week at a good margin. We need to become a profitable company. That is a good criticism that has been leveled to Tesla, an accurate one. It is high time we became profitable. And the truth is, like, you’re not a real company until you are, frankly.“
That last bit is bold not because he was speaking loudly and emphasizing it in an adrenaline-fueled way. Quite the opposite. He almost sounded like he had the adrenaline sucked out of his body and was in a restful, resigned to fate, and peaceful yet exhausted point. It was strikingly unusual for him, and it sounded like he just finally gave into the idea that Tesla should slow down and turn a profit.
Maarten’s hunch about Tesla’s/Elon’s shift with regards to the financial markets fits that conclusion perfectly as far as I can tell. And although the first reaction (if this shift is what it seems) might be that it sucks to see Tesla slow down, as Maarten highlighted, it also actually frees Tesla up to do things more in a way that makes sense in the real world — not Wall Street’s world. When you are freed from the shackles of short-sighted money managers, narrow-minded analysts, and stat-twisting shorts, you may lose some momentum, but you have an independence to go in the direction you actually want. Perhaps that’ll turn off some greedy people, but it should be a healthy and uplifting move to the many real investors who have their money on TSLA because of the long game — both the long game for society and for where they think that money is most likely to be rewarded down the road.
It might be a little sad to slow down the adrenaline rush, but seriously, it’s going to be sweet as shizzah to see Tesla dance 100% to its own tune and deliver an epic tsunami of a short squeeze.
I recall when TSLA was at around $30 a share and it seemed like an obvious win. I wondered why people weren’t investing more in it. I wasn’t an investor at the time and honestly didn’t know enough to trust that my interpretation made sense, but it sure seemed obvious and I kicked myself for a while that I didn’t get set up to invest sooner. Yet again, it seems clear that now is a good time to buy into TSLA. I’m not going to recommend it to anyone since I’m not a financial advisor and the “irrational market” has surprised me before, but it sure seems like that time approximately 5 years ago when Tesla’s stock first went into orbit. The only thing is, I think it’s target this time is Mars.
Note: This article and the two reference above from Maarten were planned and in the works before Elon’s recent tweets about shorts.