Tesla Is A Large Public Company, And Elon Musk Must Start Acting Like It
Chief executive admits to inaccurate public statements about Model 3 and Model Y amid heightened scrutiny.
By Therese Poletti and Jeremy C. Owens
MarketWatch
August 3, 2017
Elon Musk is the chief executive of a public company worth $53 billion and counting, but at many points in Tesla Inc.’s earnings conference call on Wednesday, he sounded more like a startup founder with no hope of getting funded.
The Tesla TSLA, +1.98% CEO spouted off some sarcastic gems Wednesday while admitting making inaccurate statements and flippantly dismissing any concerns about them. In Musk’s world, mistakes like an inaccurate and potentially material statement made to journalists about the most important product launch in company history is no big deal. Instead, it was “just a guess” and “inconsequential,” just like all the other errors along Tesla’s path.
“When we make mistakes, it is because we are stupid, not because we are trying to mislead anyone,” Musk said, when asked if he could predict capital spending in the next two quarters as the company ramps up its volume manufacturing of the Model 3.
That excuse just simply is not good enough for a company of this size with this much money committed to it. Investors should not stand for the type of inaccurate public statements Musk is making, nor his “Oops, kinda sorry” reaction to them.
The statement to journalists at Friday’s Model 3 launch event is a prime example. Musk told reporters that Tesla had 500,000 reservations for the Model 3, an important figure that investors, journalists and analysts had been clamoring for an update on since Tesla originally announced 373,000 reservations more than a year before.
Musk admitted Wednesday that statement was inaccurate, explaining that Tesla had received 518,000 total reservations for the car, but that current net reservations stand at 455,000, due to cancellations.
“I don’t think it really has much materiality,” Musk said of the number.
Materiality is not for Musk to decide, however. It is up to the Securities and Exchange Commission to determine if he made an inaccurate material statement, and the SEC has already made Tesla a target in the past year. Giving an inaccurate, and higher, number of willing customers for a product that Musk himself has presented as the end result of his original master plan just might qualify.
And investors certainly have interest in demand for the Model 3. Since Musk originally unveiled plans for the car last year, Tesla stock has gained more than 43%, with most of the gains coming as the car has neared production this year. So far in 2017, Tesla has gained 51.7%, while the S&P 500 index SPX, +0.05% has increased 10.6%.
With those gains comes more attention that should lead Musk to be extremely careful in his statements and public appearances, but that does not seem to be the case. In Wednesday’s conference call, which was beset by technical problems that forced Tesla to end the call after a couple of glitchy minutes and reboot, Musk also corrected himself on comments he made about the design plans for a future car he calls the Model Y.
“My executive team reeled me back from the brink of insanity,” he said in walking back a statement in last quarter’s conference call that the small SUV would have a totally different architecture than the Model 3.
That statement led many to believe the Model Y would be manufactured at a different factory, which would have meant a huge increase in manufacturing costs. But Musk completely changed that fact, saying, “the Model Y will in fact be using a substantial carryover from Model 3 in order to bring it to market faster.”
Along with a history of missed forecasts and delays, statements like these definitely should cause investors to question Musk’s credibility, especially when he makes statements like this one on the Model 3 production ramp:
“What people should absolutely have zero concern about — zero — is that Tesla will achieve a 10,000-unit production week by the end of next year.”
Actually, people should have plenty of concern at this point, as Musk has not proved himself to be a reliable executive when it comes to financial metrics, deadlines and public statements. Tesla has admirable goals and has accomplished more than most observers would have expected, but that has only put a bigger spotlight on the company and its CEO, and Musk must adapt or he and Tesla could face consequences.
Elon Musk is the chief executive of a public company worth $53 billion and counting, but at many points in Tesla Inc.’s earnings conference call on Wednesday, he sounded more like a startup founder with no hope of getting funded.
The Tesla TSLA, +1.98% CEO spouted off some sarcastic gems Wednesday while admitting making inaccurate statements and flippantly dismissing any concerns about them. In Musk’s world, mistakes like an inaccurate and potentially material statement made to journalists about the most important product launch in company history is no big deal. Instead, it was “just a guess” and “inconsequential,” just like all the other errors along Tesla’s path.
“When we make mistakes, it is because we are stupid, not because we are trying to mislead anyone,” Musk said, when asked if he could predict capital spending in the next two quarters as the company ramps up its volume manufacturing of the Model 3.
That excuse just simply is not good enough for a company of this size with this much money committed to it. Investors should not stand for the type of inaccurate public statements Musk is making, nor his “Oops, kinda sorry” reaction to them.
The statement to journalists at Friday’s Model 3 launch event is a prime example. Musk told reporters that Tesla had 500,000 reservations for the Model 3, an important figure that investors, journalists and analysts had been clamoring for an update on since Tesla originally announced 373,000 reservations more than a year before.
Musk admitted Wednesday that statement was inaccurate, explaining that Tesla had received 518,000 total reservations for the car, but that current net reservations stand at 455,000, due to cancellations.
“I don’t think it really has much materiality,” Musk said of the number.
Materiality is not for Musk to decide, however. It is up to the Securities and Exchange Commission to determine if he made an inaccurate material statement, and the SEC has already made Tesla a target in the past year. Giving an inaccurate, and higher, number of willing customers for a product that Musk himself has presented as the end result of his original master plan just might qualify.
And investors certainly have interest in demand for the Model 3. Since Musk originally unveiled plans for the car last year, Tesla stock has gained more than 43%, with most of the gains coming as the car has neared production this year. So far in 2017, Tesla has gained 51.7%, while the S&P 500 index SPX, +0.05% has increased 10.6%.
With those gains comes more attention that should lead Musk to be extremely careful in his statements and public appearances, but that does not seem to be the case. In Wednesday’s conference call, which was beset by technical problems that forced Tesla to end the call after a couple of glitchy minutes and reboot, Musk also corrected himself on comments he made about the design plans for a future car he calls the Model Y.
“My executive team reeled me back from the brink of insanity,” he said in walking back a statement in last quarter’s conference call that the small SUV would have a totally different architecture than the Model 3.
That statement led many to believe the Model Y would be manufactured at a different factory, which would have meant a huge increase in manufacturing costs. But Musk completely changed that fact, saying, “the Model Y will in fact be using a substantial carryover from Model 3 in order to bring it to market faster.”
Along with a history of missed forecasts and delays, statements like these definitely should cause investors to question Musk’s credibility, especially when he makes statements like this one on the Model 3 production ramp:
“What people should absolutely have zero concern about — zero — is that Tesla will achieve a 10,000-unit production week by the end of next year.”
Actually, people should have plenty of concern at this point, as Musk has not proved himself to be a reliable executive when it comes to financial metrics, deadlines and public statements. Tesla has admirable goals and has accomplished more than most observers would have expected, but that has only put a bigger spotlight on the company and its CEO, and Musk must adapt or he and Tesla could face consequences.
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