Three Things I Think I Think – Tesla X 3

Oh yeah baby. This the post you have not been waiting for – all Tesla all the time. Here are three things about Tesla I think I am thinking about:

1) Tesla and short-termism. So, Tesla is talking about going private. The main reason for this is supposedly because the stock creates all sorts of short-term distractions that are not aligned with the long-term goals of the company. I always find this to be an odd view. If you want long-term shareholders who don’t get distracted by short-term noise then be more explicit about the type of investors you want. This is precisely what Warren Buffett does. He does not cater to short-term oriented investors and Wall Street with their conference calls and analyst demands. He realizes that the business of Wall Street research is big business that can create a conflict of interest between the way the business is run and the way the stock is perceived. He’s always been very clear about this and he attracts a more long-term oriented shareholder as a result.

Now, that’s easier said than done when your stock is heavily shorted because the shorts have to constantly put pressure on the company because being short stock forever is a losing game. In other words, short sellers are inherently short-term. But the answer there is that you have to deliver better results. For instance, if Tesla is indeed going to be profitable in H2 of this year (as they claim) then you’d think that that would be enough to kill the shorts and satisfy long-term shareholders. But all of this makes me think that Tesla is not in fact going to be profitable and that the pressure from shorts will remain warranted as a result. In other words, the short-term pressures aren’t going away because Tesla quite simply isn’t succeeding at the rate that they were expected to. So Tesla has no other option than to worry about short-termism if they remain public.

This brings us to thought 2….

2) Tesla and advertising. Tesla has a $0 marketing budget. They rely entirely on word of mouth and organic news to generate buzz about their business. This is really interesting in the scope of the stock market because nothing generates buzz quite like Tesla stock and the way Musk talks about the stock. You could make a strong argument that Tesla’s most valuable asset is actually its public stock price because it is a near daily source of media attention.