In so many meetings, people just want to hear themselves talk, whether to offer some opinion, reiterate some point, or ask some useless question. If your goal is, "end this meeting as quickly as possible so I can start fixing the things that need fixing", often the other people in the meeting become your careless adversaries.
edit: I regret trying to raise this point in a thread about Elon Musk. :-(
It is obvious to anybody looking at the balance sheets of the company that TSLA will need to raise capital soon. Either late 2018 or maybe early 2019. A company with $3 Billion cash that's losing $1-billion per quarter will need more money. That's just the facts.
Musk is going to be either relying upon institutional investors / the stock market in general for another round of equity offerings, or relying upon banks for a loan. In either case, it seems like Musk just bit the hand that feeds his company money.
Another 300,000 reservations at $1000 per is probably not going to happen. There are fewer and fewer ways for TSLA to raise tons of money.
I'm not necessarily saying "TSLA Will definitely run out of money in 3-quarters". I'm saying "TSLA is currently, on a linear-approximation track to run out of money in 3-quarters".
Obviously, the Model 3 rampup will improve profitability. But the Model 3 Ramp-up also requires more resources (more humans in the assembly line. More robots in the assembly line. etc. etc.). So that still requires money.
A linear approximation is basically a quick-but-shitty-approximation. Its really easy to calculate and full of flaws, but full of flaws in a way that almost everyone can immediately understand.
Exponential approximations (ie: Musk's approach) might be more realistic... since production lines can exponentially grow to some degree. But if you are off by even a little bit, then you end up being ... oh I dunno... 8-months to 10 months late with your 5000-cars per-week estimate.
Which would explain Elon ending the conference call. Instead he spent 15-20 minutes taking open-ended questions from a youtuber with a TSLA position of 56 shares.
>If your goal is, "end this meeting as quickly as possible so I can start fixing the things that need fixing"
For Elon the 'things that need fixing' are exactly what the investors he cut off were asking about. If he is so focused on fixing those things he should have been able to give easy answers. The dodge is illustrative of how well he's handling those problems.
As well it seems ridiculous that the CEO of a ~$50B company can't spare an hour or two every quarter to explain his own company. Even Elon Musk isn't that busy.
How long is your piece of string?
Well this morning it was three metres but then we doubled it and it looks like that was too much so come back tomorrow and we will let you know.
- There is no answer
- Musk does not know the answer
- Musk does not want to admit he does not know the answer
- Musk does not want the answer to be known
I think that Matt Levine (bloomberg) might suggest there's more & easier money to be had in the private market, anyway (see Uber, pre-IPO Spotify, etc...).
The problem for Musk, if he also shares that view, is that taking the company private seems (to me) like an impossibility at this point.
That hypothesis is, at least so far, not sustained by the evidence of private-market darlings continuing to rise in the public markets.
The situation has a lot in common with why leveraged buyouts almost always end in disaster, dispite the hype surrounding them when they are first annouced.
Not just softballs... questions that have nothing to do with Tesla today or the near future... rather... questions about Elon's whimsical dreams of the far future and how Tesla might possibly play into that.
Questions about fully autonomous electric vehicle taxi fleets, etc... but he skipped all the questions about how he's going to get Tesla there or how to survive long enough to see that future.
Yes his shareholders, you know the people that were specificly invited to this call, own the company and that he has to directly answer to, by law.
Instead musk decided to childishly deflect.
Obviously the appropriateness is different, but this is not new behavior. Anyone trying to draw conclusions about the state of tesla from his behavior here is probably making mistakes (or at least using bad data) unless they thought the same BEFORE this call.
Interestingly though, markets are reaction to this response emotionally.
Some people on HN think Musk is doing us all a favour by allowing us to participate in his projects. Evidence of this is the inevitable, "Elon should take the company private" that seems to surface in these threads. As if going public is a favour from Musk, as opposed to a way to raise capital.
The company is public and the CEO is accountable to the shareholders. Period. The hubris with this company is shocking.
No matter what he does he'll more than likely be fine on the money side.
Then he shouldn't be the CEO of a public company which continues to sell stock and debt to investors on the promise of a return.
Also, Elon Musk very much does care about returns. He has a great track record in that department. He's just learned it's not something that's healthy to focus on in the short-term. Unfortunately, running out of cash forces the compression of time horizons. The latter is what investors are rightfully worried about.
For what it's worth, I agree that the post was ridiculous - Musk's behaviour is dumb and with every week that goes by I expect reality to catch up with him more and more. But I don't think the HN community should be flagging and killing posts for being naive and un-business-like. I struggle to identify what rule was broken there, and (supposedly) west coast "money is free" bias is not a good reason to suppress someone's post from being visible.
And it's not that simple that he can just raise debt or equity if Tesla's stock starts tanking. There aren't billions of dollars out there to be invested or loaned to money losing companies whose stock price is tanking. If come Q4 Tesla is having to raise money at a lower valuation, it becomes even more difficult to see the path to success.
Tesla has been thoroughly analyzed every which way, moreso than other companies. Really there is no end to the amount of info that Wall St wants, everyone is trying to make a buck and wall st senses the hype.
>There aren't billions of dollars out there to be invested or loaned to money losing companies whose stock price is tanking.
Tesla is public. Yes there is. Just depends on whether you can stomach the risk.
Why wouldn’t Musk release a detailed plan of what is going to materially change in their production goals and capital expenditures over the next sixth months in order to finance their debt? Explain the process for how the make their projections and pronouncements? Explain why it is prudent to invest in multiple new models and production lines when his company is burning through $4 billion a year and can’t meet current production targets? Why doesn’t he explain how many of the 500,000 Model 3 deposits remain, given that at current production rates that will take almost a decade to meet? Why doesn’t he provide monthly sales figures like every other automaker?
> Tesla is public. Yes there is. Just depends on whether you can stomach the risk.
You understand that greater risk necessitate the possibility of greater return, right? What interest rate is it going to have to be paying on debt it raises? TSLA bonds are already at 8% interest, in junk bond territory.
If financials deteriorate further is he paying 10%? 12%?
In that situation how much of Tesla’s revenue is just going to be eaten up paying interest on the $10 billion in debt it currently has, plus an additional capital raise? That makes the cash flow issues even worse.
If Tesla raises equity, how much of a hair cut does the enterprise value take? With the amount of debt it currently has, it doesn’t take much before you start thinking insolvency.
Society is PLAGUED with people who can't see any subject outside the lens of money. It's all people think about, it's disgusting.
Tesla's CEO is an engineer first and foremost. He doesn't give a s* if a worthless day trader doesn't know how to position. If the company dips into unforeseen debt while ramping up production, whoops.
They're pushing cars that will contribute to a sustainable future, that's what important here.
Tesla will still be fine in the long run. Tesla cars are still high in demand. You still have to wait weeks/months to receive one.
Sorry to all the vampires who don't know how to make a quick buck.
I'm sorry, but when trying to value an investment, or determining whether I should make a loan, I think the lens of money is important. There's a reason people form corporations rather than charities. Corporations are able to fund themselves sustain driving new things year over year. Charities finish when the money runs out.
What is Musk trying to build if it isn't a sustainable corporation?
> Tesla's CEO is an engineer first and foremost. He doesn't give a s* if a worthless day trader doesn't know how to position. If the company dips into unforeseen debt while ramping up production, whoops.
This sort of flippant comment is naive. You don't think the employees whose stock is vesting in the company care about how it is going to be valued or fund itself in the future? If I'm a talented engineer, why should I work for Tesla if the stock the grant me could be worthless in 6 months? Or what about those on the production lines, worrying about whether their factory might close down?
If you care so much about the company's ambition, you should care about their financial situation. Without it, they aren't going to be able to do any real research and development, hire the best talent, or do any of the basic functions necessary to make electric cars in the future.
> They're pushing cars that will contribute to a sustainable future, that's what important here.
If you care about that, you should care about the company actually having a financial plan to achieve those goals.
> Tesla will still be fine in the long run.
Why? Without answering the financial questions I described above, there isn't any way to predict that accurately.
> Tesla cars are still high in demand. You still have to wait weeks/months to receive one.
That's less of an issue with demand than an issue of supply. Tesla is struggling to put out 4000 cars a week, and there's a Ford F-150 sold every minute in the United States.
> Sorry to all the vampires who don't know how to make a quick buck.
I'm sorry you believe that those who care about Tesla's financial situation are just trying "to make a quick buck". To build the future, you first have to fund it.
Tesla is doing fine. If you don't think the stock is worth it, don't buy it. There are plenty of other companies out there that need funding.
At some point you have to stop worrying about the monthly cash flow and believe in the product, although if you view everything through the lens of money I doubt that's possible.
Tesla may survive, as there seems to be no end of people bad at math, but a company doesn't burn through a billion per quarter for too long before "fine" is no longer the correct word.
Tesla may not be fine. One ought not to go out of one's way to bite the hand that feeds one.
Wall Street acts as a leaky pipe funneling money between investors and Tesla.
If such a thing existed that would bring in the amount of money to Tesla that it has needed, it would.
There are elderly people with their futures invested, pension funds that will pay people's bills, etc. Tesla really should answer the questions of its owners.
I am so sick of the cult of Elon. There is no defending his behaviour here.
What he's done is remarkable. But he should step down, assign himself a founder/chief scientist title, and move forward with "fixing" his company. No fear of ejection; I suspect he's a major shareholder.
A crazy high valuation is no guarantee that a company can not go bust at some point, though in Tesla's case if they run out of money all that will likely happen is that their next round will be one at a lower valuation and with a group of investors that cares less about the short term.
Elon made the decision to play on Wall Street, that decision comes with some responsibilities and it is downright strange to see him literally bite the hand that feeds him. Without the cash he picked up through the IPO Tesla would be in a completely different position. He's made a couple of boneheaded moves (such as rolling Solar City in with Tesla), which have so far been accepted because of the halo and the promises. But there is a limit to how far that will stretch and I'm confused why he would stretch that on purpose if he has other alternatives (such as simply answering the questions). If he doesn't have any answers, which is one way to interpret his refusal, then Tesla is already in trouble.
As I write this, TSLA is down about 6% on the day, and it's not as if sharp drops or a general downward trend are unusual over the past year. They're in real trouble, and this doesn't seem like a good time for Musk to let his ego out of its box.
[0] https://twitter.com/elonmusk/status/799908000689336320
[1] https://twitter.com/elonmusk/status/823727035088416768?lang=...
I'm not sure how that reflects on Tesla. Tesla is not manufacturing bicycles. Nor are they manufacturing Model As in the 1930s automobile market.
By the 1930s, Ford Motor had 30 years of experience. Between 1908 and 1924, Ford built 10 million Model Ts.[0]
I don't know if Tesla will build 10 million cars by 2024. I think that would be incredible if they did. Nor do I know if they will be manufacturing 2 million/year by 2030. If that happens, they will have matched Ford. They will have done it in a mature market, unlike Ford. They will have done it with modern manufacturing technology. They will have done it when owning a car is taken for granted. I'm still not sure how that comparison would reflect on Tesla.
A comparison with 1918 Ford vs 2018 Tesla seems more relevant than a comparison between 1930s Ford and 2018 Tesla. But it still doesn't seem like a very clean comparison.
[0] https://www.history.com/this-day-in-history/fords-assembly-l...
I'm just not sure how applicable the comparison is. I think you could compare 1930s Ford vs contemporary automakers to 2018 Tesla vs contemporary EV makers. But comparing 1930s Ford vs horse and buggy to 2018 Tesla vs contemporary automakers seems less apt to me. I think the move from horse and buggy to automobile was very different than the move from ICE vehicles to EV vehicles.
I do think that Ford's early success is incredible. It is astonishing to me that Ford could be selling millions of cars a year in 1930. I'd be interested in other transitions involving such a large expense that happened so quickly. It is interesting to wonder what the equivalent would look like today. But I don't think it is exactly fair to label someone a disappointment if they don't measure up to 1930s Ford.
I don't think so. The material takeaway is Tesla will need to raise new capital in 2018. The numbers implied it. The market previously guessed Musk had some genius plan to avoid it. On this call, the lack of such a plan became evident. Dilution and/or increased default risks/interest costs are being priced in.
> But then, acting within the confines of normality isn't really the trait that may bring the dawn of a new era of humanity.
Tesla is not bringing 'the dawn of a new era of humanity', it's an electric car manufacturer. They came and went and now they're back.
Truly, this sounds divorced from the reality of anything Elon Musk is involved in. He’s making electric cars, rockets, and solar panels, not fusion power or immortality pills. Let’s be realistic! I think it’s important to separate what he actually does from what you desperately hope he may someday do.
Do you credit Musk with coming up with the idea of getting to Mars?
He might kill a bunch of people trying.
They make cars.
'And so where specifically will you be in terms of capital requirements?' Sacconaghi said.
'Excuse me. Next. Next,' Musk said to the call operator. 'Boring, bonehead questions are not cool. Next?'"
https://www.bloomberg.com/news/articles/2018-05-03/elon-musk...