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Tesla (NASDAQ: TSLA) Tries to Distract from Cash Burn, Fails Miserably

Written by Jason Stutman
Posted May 5, 2018

Feel free to write in and tell me if I’m beating a dead horse on this topic, but I honestly can’t think of a better story to cover this week. This has truly become a spectacle and a circus at this point.

Loyal Wealth Daily readers know my long history of Tesla (NASDAQ: TSLA) criticism. I’ve been fairly relentless in this regard, with article headlines reading:

  • “Why Tesla’s Stock is Going Down”

  • “One More Reason Tesla is Going to Crash”

  • “How I Made Money Off Tesla’s Crash”

  • “5 Major Risks Facing Tesla (NASDAQ: TSLA) Shareholders Today”

  • “Is Tesla (NASDAQ: TSLA) Overvalued?”

  • “Tesla's (NASDAQ: TSLA) Fourth Quarter: Red Flags and Red Herrings”

  • And more recently: “Is Tesla CEO Elon Musk Losing His Mind?

So far, I’ve been right on the money with these calls. Tesla’s stock is down from a peak of $383 on June 23 to $280 today. The first article listed above, “Why Tesla’s Stock is Going Down,” was written on July 9, just two weeks after that peak.

You may have already heard about Tesla’s “wacky” conference call earlier this week, which undoubtedly contributed to a 7% gap down on Thursday. There’s been plenty of media coverage on the call already, so I’m going to offer some perspective and insight you haven't read about yet.

Just to give you a rough idea of how Tesla’s conference call went, let’s take a look at a few mainstream media headlines.

  • MarketWatch: “Tesla analysts call out Elon Musk after ‘truly bizarre’ conference call”

  • Wall Street Journal: “Tesla Can’t Make its Cash Problems Disappear”

  • USA Today: “Elon Musk dismisses talk of Tesla cash crunch: ‘Boring questions are not cool’”

Yeah, you read that last one correctly: Elon Musk, the CEO of a $50 billion public corporation (the shareholders of which he has a fiduciary duty to), dismissed questions about the company’s income statement and balance sheet as “boring” and not quite hip enough.

Obviously, this should be incredibly concerning to Tesla’s shareholders on its own, but the call gets even weirder than that.

In an effort to “make conference calls cool again,” Elon Musk invited hipster Tesla fanboy and amateur YouTuber Galileo Russell to absolutely dominate the call.

Here’s how Musk got to introducing Russell. You can’t make this stuff up.

Antonio M. Sacconaghi (Sanford C. Bernstein & Co. LLC):

And so where specifically will you be in terms of capital requirements?

Elon Musk:

Excuse me. Next. Boring bonehead questions are not cool. Next?


Thank you. Our next question comes from Joseph Spak with RBC Capital Markets.

Joseph Spak (RBC Capital Markets):

Thank you. The first question is related to the Model 3 reservations, and I was just wondering if you gave us a gauge as maybe some of the impact that the news has had. Like, of the reservations that actually opened and made available to configure, can you let us know, like, what percentage have actually taken the step to configure?

Elon Musk:

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

Russell came up next and ended up speaking a total of 17 times, with the next closest analyst fitting in just six (much briefer) comments.

Russell's portion of the question-and-answer session spanned 3,500 words. For perspective, the entire question-and-answer session was just 9,600 words, meaning Russell occupied more than a third of the Q&A period.

That’s pretty ridiculous.

Given the amount of attention Russell got on the call from Tesla, you might think he’s some kind of stock market phenom, but this is hardly the case.

I’m actually one of the few people familiar with Russell before this week. I’ve been watching him since he first launched his YouTube channel “HyperChange” almost two years ago, and my basic read is that he’s little more than an overzealous fanboy for stocks he deems to be trendy and socially responsible.

Now, before I get too harsh, I will put it out there that I actually do think Galileo is a bright kid, hopefully with a promising future ahead of him. He produces content that makes investing approachable to younger demographics, which isn’t easy to do, and his “Stocks 101” series carries some useful insight for market novices.

At just 10,000 subscribers, I will even say that Russell’s YouTube channel is under-watched. But he also still has a lot to learn.

The reality is that simply being good in front of a camera and knowing how to edit videos well doesn’t make you a good stock analyst. You need to develop a good track record of calls before you’re worth being taken seriously, and Russell has done just the opposite.

The most obvious is Russell’s $400 call on Tesla back in February (we're down to ~$280 today), but there are a few lesser-known stocks he’s taken a stab at that have been disastrous.

Take Where Food Comes From (OTC: WFCF), for instance, which Russell hyped up in December 2017. His coverage ended up sparking a nice little pump and dump, torching (-40%) any investor who bought into what Russell described as his “favorite microcap company.”

Russell has also been hyping up Jones Soda Co. (OTC: JSDA) since November 2016; shares are down 28% in that time frame.

He also called Reed’s, Inc. (NYSE: REED) a “10-bagger” back in March. That one’s down 46% to date. Guess it's a 20-bagger now...

Russell has made at least one good call on his YouTube channel on IPG Photonics (NASDAQ: IPGP), but the record is inconsistent at best. Of course, you could make the argument that these are long-term positions, but that's just a sales pitch.

The point is, why have a juvenile, hipster version of Jordan Belfort on the call, let alone give him a third of the Q&A session? In any universe other than Elon Musk's, this is certifiably insane.

The answer, of course, is so that Tesla can distract from its cash burn and the troublesome state the company is in.

Once you look past the charade, it’s really as simple as that.

Until next time,

  JS Sig

Jason Stutman

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