It seems that Tesla (TSLA) CEO Elon Musk had his facts slightly twisted in his tweet Thursday afternoon. It is not the Securities and Exchange Commission that is his bête noire, but he himself who is a one-man "Shortseller Enrichment Commission."
Tesla shares have been in reverse since Monday's relief rally on news of his settlement (which also affected the company) with the aforementioned SEC, and are plunging again in early trading Friday.
I really cannot question the wisdom of baiting a body that holds ultimate regulatory power over any publicly listed company and with whom Musk has just reached a tentative (it is still awaiting approval from the U.S. Second Circuit) settlement. That is simply because there is no wisdom at all.
What possible purpose does it serve for Musk to antagonize the SEC? It is especially stupid, since as reported by Charlie Gasparino of Fox Business, the SEC is still investigating issues related to Tesla's reporting of production and delivery versus targets, a matter completely separate from Musk's now-infamous "funding secured" tweet of Aug. 7.
I have made my bearishness on Tesla quite clear on Real Money owing to its ridiculous valuation, which seemingly has zero correlation with the strength (or lack thereof) of its financials. Now, however, after Musk's latest tweet, I am downgrading Tesla further by using one of my favorite terms: "radioactive." The radioactivity in Tesla shares is wholly due to Musk's tweeting, and I don't think that he is going to change his communication habits any time soon.
As per the terms of Tesla's agreement with the SEC, Musk will step down as chairman of Tesla's board, and some have speculated that a strong hand could rein him in. Not bloody likely!
Leaks have emerged this week mooting Tesla board member and Twenty-First Century Fox (FOXA) CEO James Murdoch as a possible new chairman for Tesla. Should we expect Murdoch to wield the whip hand on Musk at board meetings when he has clearly not done so since he was added to Tesla's board last year?
Apart from Murdoch, some of the other names suggested have been Al Gore -- a suggestion from Loup Ventures' Gene Munster that actually made me laugh when I first read it -- Warren Buffett and recently departed PepsiCo (PEP) CEO Indra Nooyi.
It is a factor of the extreme hype surrounding Tesla that such bizarre suggestions would even be published, but that does keep the story interesting. But interesting equals radioactive when a company is valued by the market at $46 billion after coming off a 12-month period (3Q17-2Q18) in which it burned through $6.3 billion of cash from operations, but that is the reality of the Tesla situation.
The third quarter represented a massive increase in deliveries for Tesla (unlike other car companies Tesla books revenues on delivery rather than production, so that should be the guiding figure for analysts) with 83,500 units delivered versus 40,740 in the second quarter of 2018. The figures were merely in-line with my expectations and those of Wall Street analysts, though, and perhaps Musk is frustrated because he does not understand the expectations game.
But it is expectations that matter most to any stock, and it is interesting that among Musk's numerous tweets this week there has not been one foreshadowing a report of a quarterly operating profit for Tesla when it reports third-quarter results. That is a tweet that would reverse Tesla's shares' downward trend, and I don't think it is one that Musk is afraid to send. He certainly does not seem to fear regulation of any kind, and don't forget that reports have suggested the Department of Justice is still actively investigating Tesla, as well.
Elon Musk could pull Tesla shares out of the radioactive category with one tweet, but he has not done so, and instead fills the Twitter airwaves with nonsense.
If Tesla can't make a profit in a period in which it produced 80,142 cars -- given the high-spec nature of early production every single one of those units was a luxury car by my classification -- then the entire business model has been disproven. Only a new CEO, as opposed to a non-executive chairman, could fix that, and I don't see that happening soon.
So, I'll keep reading Musk's tweets with amusement and keep avoiding Tesla's radioactive stock.