I’m in that camp. I want viable, cost-effective on their own merits, electric cars. I want a vibrant, accessible space industry. I want extra-terrestrial coloNization planning.
I’m short TSLA (about 25% of my liquid investment balance) since the summer not because I hate Musk, but because I believe it’s personally profitable to be so due to the utterly insane valuation. Near flawless execution is baked in on a manufacturing company likely less than 15 months from being out of cash.
I wish Musk well. I hope he navigates through the challenges ahead for the good of humankind. Even if he does so fairly successfully, I like the expected value of my short position.
I'm less sure about that. They have risk, certainly, but they could stumble somewhat or have to raise more funding and still ultimately end up doing as much business as Ford or GM.
Their valuation is slightly higher than that because if everything really goes their way they could end up as the electric version of Toyota at more than three times their current market cap. With higher margins because of the simpler powertrain, which reduces both manufacturing costs for Tesla and maintenance costs for customers who are correspondingly more willing to pay a higher purchase price.
Or they could fail outright or become a small irrelevant electric supercar company.
The efficient market hypothesis says their valuation should approximate their risk-adjusted actual value. Which is always wrong by a little, usually not by a lot.
The interesting thing here is that they're a rather large company that nonetheless has potentially high volatility, which is actually pretty unusual, and invites speculation (and therefore drama). And if a $45B valuation is a result of a 40% chance at a continued $45B valuation and a 15% chance at a $180B valuation, the valuation is correct even though some people may lose their shirts. We just don't know which people yet.
No sane investor will pay $45 for a 40% chance of $45 and 15% chance of $180 in 8 or 10 years.
(I agree with your premise, but the numbers need to be larger such that their present value, not future value solves.)
Even after the big selloff, Tesla's market cap is still higher than GM's. Its valuation is extraordinarily high in large part because Musk has hyped it to the heavens. That has given him an amazingly low cost of capital and enormous free advertising. But the downside is that people who aren't drinking the koolaid can reasonably think that the valuation is too high, and want to bet accordingly. GM has 1/10th the short position because most people think the stock is priced correctly. Tl;dr: Musk's hype made some people go long and some go short. That's what talking a stock up does.
The rise in bad press isn't primarily due to the short-sellers. Plenty of reasonable analysts are concerned about Tesla's repeated failure to meet projections, long-running manufacturing issues, and bad cash position. That's a good chunk of the press. But I think the bulk of it comes from a) the inevitable turning of the hype cycle, and b) Musk's own public antics. Short-sellers didn't make him call a hero a pedophile. They didn't make him spend a lot of time shitposting on Twitter. They didn't make him sell flamethrowers or date Grimes or have Azlea Banks over. They didn't make him smoke weed on camera. They certainly didn't make him write to a reporter to double down, calling the cave diver a "child rapist". [1]
I feel bad for the guy; I know from personal experience that entrepreneurship is high stress. But he knew what he was getting into, and he could be handling this a lot better.
[1] https://www.buzzfeednews.com/article/ryanmac/elon-musk-thai-...
Part of that is because GM has a low valuation relative to e.g. their sales volume, because they not so long ago had to be bailed out by the government, are loaded up with debt, and are facing the prospect of a market shift toward electric and autonomous cars that may favor new entrants over incumbents.
> Plenty of reasonable analysts are concerned about Tesla's repeated failure to meet projections, long-running manufacturing issues, and bad cash position. That's a good chunk of the press.
Sure, but none of that is really new and is the sort of thing analysts always cover about any company.
> Short-sellers didn't make him call a hero a pedophile. They didn't make him spend a lot of time shitposting on Twitter. They didn't make him sell flamethrowers or date Grimes or have Azlea Banks over. They didn't make him smoke weed on camera. They certainly didn't make him write to a reporter to double down, calling the cave diver a "child rapist".
It's not that they made him do it, it's that they may be spurring coverage of things like that even though they have little to do with the fundamentals of the business. Half the people are saying he should take a vacation and the other half (or maybe the same people) are saying he shouldn't be wasting time shitposting on Twitter as though he should be working 24/7. So is he working too much or not enough?
It's more probable than not that he should take a short vacation (or some other kind of break) and stop shit-posting on Twitter. Those aren't mutually exclusive options.
Temporarily taking a slightly lower profile and spending his focus on things that actually matter to his companies (cave divers, pop stars, and short-sellers are not in that set, IMO) would probably be good for everyone/everything that Musk cares about.
What I'm asking is, why do people care? It can't just be because other people do. It takes a significant number of people to care for no good reason before it makes sense to care just because other people do.
It's simultaneously possible to be against Musk continuing to do things like that and be against the media continuing to cover it as though it should matter.
As to why other people care, people love celebrity gossip, especially “bad” gossip. It sells ads and clicks and generates conversation. At some point, it becomes self-sustaining. I agree that it’s terribly uninteresting in general to me.
Note that I believe his erratic and lightly considered Twitter posts are one thing (ignorable) generally, but I think the $420/“funding secured” tweet to be much more likely legitimate news and quite likely of the “watch me burn these shorts!” securities fraud variety. There is an extent to which such legitimate interest in that tweet brings interest in his other tweets to understand whether the CEO of a many-multi-billion market cap company is prone to communications that put his company/others’ investments at risk. I suspect that extent is less than what is being covered, because it’s a justification for why (largely) respected financial news sources are now able to cover salacious details of his private life with plausible explanation as to why.
He could have pursued Tesla in a quiet, modest way. Instea of making bold predictions, he could have underpromised and overdelivered, letting results do the talking. He could have stayed out of the limelight, remaining just another CEO.
We all know what he did instead. And that surely got him a low cost of capital and a ton of free PR, so it's reasonable to argue it was the right business move. But having put himself in the spotlight and made it all about Elon, I don't think it's reasonable to claim it's unfair that he's now in the spotlight.
If we're being purely rational, people shouldn't care about the technology genius mystique, and they shouldn't worship high-profile business executives. But they do, and Musk grabbed that with both hands. He can't do that, glory in the upsides, and be upset about the downsides. It's a package deal.
There is also this business with the short sellers. That may explain at least part of this lately -- all people regularly do random small-scale unwise things but most of the time (even for celebrities) nobody cares. But take some rich short sellers who already kind of dislike you and publicly challenge them to a duel, when they already had a profit motive to cause your company's shares to decline, and is it any surprise if they put their dirt finding and publicizing apparatus into overdrive?
That still doesn't excuse Musk's behavior. Especially since this should have been a predictable consequence of challenging them so he should be keeping his nose extra clean. But it isn't an implausible explanation for the sudden rise in bad press.