Elon Musk clarifies on his ‘surreal’ earnings call performance

Two days ago, Tesla Inc. (TSLA) reported a huge quarterly loss, and then CEO Elon Musk went on to do something unbelievable. He refused to answer serious questions from two analysts on Tesla’s capital requirements and Model 3 reservations because they were, according to him, boring and dry. Wall Street did not take this erratic behavior lightly and sent the stock plummeting 7%. Shares have not yet recovered from Musk’s meltdown.

Today, Musk defended his behavior on Twitter claiming the analysts were sell-side, trying to justify their Tesla short thesis. He said HyperChange, a YouTube investment channel from whose owner he took several questions, represented real investors.

Interestingly, the analysts who were snubbed by Musk – Toni Sacconaghi of Sanford C. Bernstein & Co. and Joe Spak of RBC Capital Markets – both have a hold rating on Tesla stock. Sacconaghi said unwillingness to talk about important financial metrics was not a good sign and it either indicated a careless attitude or just bad numbers. Either way, it was not comforting for investors and could easily dent their confidence in the company’s outlook.

Other analysts too reacted strongly to Musk’s behavior, with one commenting that he should grow up and answer serious questions from serious analysts and not retail analysts. Others called the call ‘unusual’ and ‘surreal’ and went on to say that it was not a good idea to alienate analysts whose support Tesla would need when it comes to capital-raising.

Musk tweeted that it had been foolish of him to ignore the analysts and that he should have answered their questions. He said Tesla is the most shorted stock in the market and has been so for a while. He added that he called the Bernstein analyst’s Capex question boneheaded because he had offered a detailed explanation on the topic in the Q1 newsletter sent out earlier to analysts.

As for the RBC analyst’s question on Model 3, Musk wrote that it was absurd because Tesla has around half a million reservations without any advertising or showroom displays. Even in a 5,000 units per week production scenario, it would take two years to satisfy the existing demand alone even, if new sales dropped to zero.

Musk tweeted that it had been foolish of him to ignore the analysts and that he should have answered their questions

Musk, by all means, remains fiercely protective of his baby. Despite many controversies over the Model 3 production delays, a fatality involving its Model X, its voracious cash burn, bankruptcy threats and so on and so forth, Musk has projected optimism on Tesla. He said the production of Model 3 was on track and that the company would turn profitable in the third quarter. Musk also said capital expenditures for the year would be less.

Musk is also positive about the success of his upcoming projects and his ongoing investments in new facilities. He also has plans to restructure his company and turn it more productive. In the retrospect, he is confident of proving naysayers wrong. But he also seems to have realized the folly of his overreaction as he offered further clarifications on his behavior.

While Elon seems confident that investors shorting Tesla stock would regret it, it might be wise not to burn too many bridges just too soon. Tesla still has quite a way to go.