The analyst who Elon Musk cut off during a bizarre earnings call isn't giving up - and he has a case

The analyst who Elon Musk cut off during a bizarre earnings call isn't giving up - and he has a case

Elon Musk

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Tesla CEO Elon Musk.

  • After being kicked off a Tesla Q1 earnings call by Elon Musk for "dry" questions, RBC analysts Joseph Spak has returned with a letter to the CEO.
  • He also suggested that Musk host a webcast to talk about Tesla's future.
  • Musk doesn't appear to be much enjoying his role as CEO of a public company that's dependent on Wall Street for funding.

Tesla CEO Elon Musk laced into RBC analyst Joseph Spak on a surreal first-quarter earnings call last week, after Spak asked a question about reservation holders for the company's Model 3 mass-market vehicle converting their deposits into orders.

"We're going to go to YouTube," Musk said. "Sorry. These questions are so dry. They're killing me."

What followed was over 20 minutes of softball futurism from a YouTuber who had appealed to Musk on Twitter to be allowed on the call to represent retail investors.

Tesla stock was hammered on the next trading day, so Musk again took to Twitter to limit the damage and then spent about $10 million of his own funds to bolster shares (it's worth noting that Musk's personal cash comes from bank loans that are leveraged against his Tesla stake of about 20%, so make of that maneuver what you will).


After what looks like a cooling-off period, Spak on Wednesday published a letter to Musk in the form of a research note.

Spak - who has a $280 price target on Tesla and a hold rating - justifiably pointed out that it's his job to make probing financial inquiries and not invite CEOs to opine about forthcoming projects. Then he listed the questions he didn't get to ask on last week's call:

  • If the 2019 converts remain out-of-the-money, how do you plan to address the capital structure?
  • Are more Model 3 reservation holders than expected deferring and if so is it for the AWD variant?
  • How much of an impact is the temporary additional labor [Tesla is hiring to go to 24/7 Model 3 production] and how quickly can you ween off it?
  • How long do you need to see sustained Model 3 production before re-evaluating capex plans?
  • With no room at Fremont and significant capex only starting next year, how do we gain confidence that Model Y production begins early-2020?

These are all reasonable questions that Musk could breeze through: We'll deal with the capital structure when and if we have to; it's possible that some Model 3 reservation holders are waiting on the dual-motor car; we can increase or decrease the workforce at any time, as needed; and we're going to have to build a new factory for Model Y, but first we're focused on the Model ramp, so look for insight on that later this year.

Wow, that was easy!

So why didn't Musk want to deal with Spak's questions last week?


Musk would be happier if Tesla were private

It's hard to say, but some of it perhaps goes to his weariness and impatience of being the CEO of a public company that's almost entirely dependent on the markets for funding. Musk has in the past said that Tesla was on track to being profitable, but in Q1 of 2018, the company lost over $700 million.

Musk would be happier if he never again had to tolerate another sell-side bank analyst's questions (Spak also suggested that Musk host a presumably livelier webcast). This isn't a mystery - he told Neil Strauss as much, in a Rolling Stone profile published last year.

"I wish we could be private with Tesla," Musk said. "It actually makes us less efficient to be a public company."

Less efficient - and for Musk, less cool. Spak's questions aren't about the future; they're about the present. And Tesla's present is nobody's idea of cool, or fun.

Read more about Tesla's bizarre first-quarter earnings call:

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