‘Bizarre’ Elon Musk call shakes Tesla shares

Grilled on Tesla, a testy Elon Musk complained of “boring, bonehead questions”, sending its shares tumbling | LISTEN

Elon Musk wanted to talk about the future of Tesla — self-driving cars, its next all-electric sport-utility vehicle and opening a factory in China.

What he didn’t seem eager to discuss with analysts on a quarterly conference call was the state of the business, after the Silicon Valley automaker burned through about $US1 billion during the first quarter as production struggles beset the Model 3 sedan.

Chief executives of publicly traded companies typically grit their teeth and coolly dance around pointed questions during these calls.

Mr Musk, known to defy convention, chose instead to spar with analysts over their “boring, bonehead” questions, cutting off two of them after they asked about Tesla’s capital requirements and Model 3 reservations.

After Mr Musk began deflecting questions, Tesla’s stock fell more than 5 per cent in about a 20-minute span.

Mr Musk has created a devoted following with his bravado and efforts to up-end transportation and save the world. Investors have lifted Tesla’s market value to rival those of General Motors Co and Ford Motor Co, much larger automakers, while often brushing off Mr Musk’s overly ambitious goal-setting.

But the stock slide shows that some investors may be losing patience. In Thursday midday trading in New York, the stock was down 7.8 per cent to $US277.65.

Following the call, analysts sent notes to clients that characterised Mr Musk’s exchange as “bizarre theatrics” and “odd,” and said Mr Musk could be viewed by investors as “dismissive” and “unhinged.” At least three analysts dropped their price targets, and bond prices edged lower.

Mr Musk’s frustration bubbled up about a half-hour into the call when Toni Sacconaghi of Sanford C. Bernstein & Co asked about Tesla’s target date for achieving 25 per cent gross margins on the Model 3 — which the company seems to have pushed back by six to nine months from the goal stated just last quarter.

Chief financial officer Deepak Ahuja attributed the delay, in part, to added labour costs and a weak dollar. Mr Musk interrupted to say the gross-margin difference is a matter of three to five percentage points and will be resolved in three to six months.

“Don’t make a federal case out of it,” he said.

Mr Sacconaghi — who co-wrote a report last month questioning Tesla’s ability to automate its factory — then turned to the company’s investment plans. Tesla had previously said it expected spending this year to about match last year’s $US3.4 billion, but yesterday announced it was scaling back plans to less than $US3 billion, which could ease its cash crunch.

When Mr Sacconaghi asked what the company’s specific capital requirements would be, Mr. Musk cut him off.

“Boring, bonehead questions are not cool — next,” Mr Musk said, turning to the operator for the next question.

Joseph Spak of RBC Capital Markets then asked what percentage of Model 3 reservation holders who have been invited to start configuring their orders have actually done so.

Mr Musk was silent for about 15 seconds.

“We’re going to go to YouTube, sorry. These questions are so dry. They’re killing me.” He directed the operator to take questions from Tesla investor Galileo Russell, whose HyperChange TV YouTube channel features a video titled, “Why I Bought Tesla Today at $255/Share.”

Mr Russell, who had campaigned to get on the call usually reserved for analysts, got more than 20 minutes from Mr. Musk. The first of his dozen or so questions: When will Tesla launch its own network of driverless cars?

“Thank you for an interesting question,” Mr Musk replied.

Following the call, Alexander Potter, an analyst from Piper Jaffray, sent a note to investors saying that Tesla’s management is “clearly fed up with fielding nit-picky questions” about Model 3 orders, production delays and other capex requirements. He dropped his price target on the stock to $US369 from $US385.

Mr Spak, one of the analysts Mr Musk cut off on the call, lowered his price target to $US280 from $US305, telling clients the “performance shook confidence” in investors “which we’d argue is an important piece of the Tesla story.” Mr Sacconaghi, the other analyst dismissed by Mr Musk, kept his price target intact, writing that “beneath the bizarre theatrics” he sees Tesla’s quarter within expectations.

When the call started, Tesla’s stock was down less than 1 per cent in after-hours trading. Mr Musk spent the first 10 minutes describing some of the challenges faced in ramping up production, such as robots’ struggles to put fibreglass mats atop of battery packs.

Analysts then began peppering Mr Musk and Mr Ahuja with tough questions about the Model 3 delays. Mr. Musk has directed the factory to run 24 hours a day, seven days a week, to reach the goal of making 5,000 of the sedans a week by around the end of the second quarter.

Brian Johnson, an analyst for Barclays, posed questions about the math, finally concluding that Tesla has about one vehicle coming off the line every two minutes, compared with the industry average of one a minute. That, Mr Johnson suggested, seemed to be at odds with Mr Musk’s claim in February that his factory would outpace the industry, which he called slower than a “grandma with a walker.”

Later, Mr Musk again praised Mr Russell’s line of questioning as he asked about a range of topics including the Model Y, which has yet to begin production.

“Asking questions that are not boring,” Mr. Musk said.

Dow Jones Newswires