Tesla Inc (TSLA)

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Elon Musk Is Stressed, but Don’t Bet Against Tesla

Elon Musk’s mood was a top story in today’s New York Times, along with Trump’s Russia problems, Google’s censorship pact with China, and our losing the Queen of Soul. These other stories may matter more to the world, but Musk’s electric carmaker Tesla (ticker: TSLA) clearly owns the market’s center stage and has become its Most Dramatic Stock.

In the article, Musk confessed to stress, overwork, and a need for Ambien to sleep. He almost missed his brother’s wedding. In an interview, Musk laughed and cried—evidence for those armchair psychologists who think he is burnt out or manic.

The melodrama has financial and legal significance. The stock market is weighing the viability of Tesla’s business and Musk’s notion of taking his $60 billion company private. The Securities and Exchange Commission and some plaintiffs lawyers will be grilling him about the honesty of his production forecasts and of last week’s tweet in which he said the funding for his buyout was “secured.”

The tweet stunned the Street, sending the stock soaring before Nasdaq halted trading.

As a legal matter, Musk faces liability only if his statements were intentionally false or reckless. Musk is informal, but probably well-intentioned. Companies settle securities suits and even SEC inquiries over such stuff all the time, without skipping a beat. Board members, lawyers and the bankers who get overpaid to rubber-stamp the initiatives of impetuous guys like Musk are understandably miffed that they weren’t consulted, before he tweeted the world about going private. Formalities exist for good reason, but articles like today’s Times piece bolster Musk’s case that he erred on the side of disclosure. That’s a good defense, under our securities laws.

There’s too much to Musk, Tesla and his SpaceX rocket company to bet they will go away. His rockets fly. His cars go.

Musk is bothered by the short sellers who have made Tesla one of the most-shorted stocks. But even if a buyout doesn’t squeeze out the shorts, Tesla isn’t an easy target. It sold $4 billion worth of cars in the June quarter. That puts Tesla about ten years ahead of the growth trajectory predicted back in 2013, when a skeptical Barron’s cover story called the stock overpriced at $102 a share. A famous short seller has said that he avoids shorting companies the world would miss if they disappeared. Tesla’s cars are wildly popular and the world would miss them if the shorts prove right.

Our original cover story did wonder if Tesla could profitably make the mid-priced car that it now sells as the Model 3. With Musk’s company burning through $1 billion in cash per quarter, he still must show he can make his popular cars at a profit.

He also clearly needs to hire a chief operating officer to take weight off his shoulders. An analysis this week by Bernstein’s Toni Sacconaghi concludes that Tesla is fairly valued at around its current stock price. The shares were off as much as 8% Friday morning, after Musk’s tell-all confessional in the New York Times, well within this wild stock’s average volatility. There are still plenty of investors who root for the tortured genius and want to give him the cash to keep trying.
https://www.barrons.com/articles/elon-musk-is-stressed-but-dont-bet-against-tesla-1534522133?mod=yahoobarrons&ru=yahoo&yptr=yahoo

GO TESLA, INC

"PEACE"

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