Wednesday’s earnings report was a bust for Tesla. The company reported a huge loss of $702 million and missed revenue expectations.
In the conference call that followed, forlorn Tesla boss Elon Musk mused about taking Tesla private again:
“I would prefer we were private, but unfortunately I think the ship, that ship, has sailed.”
Elon Musk desperately wants to pull Tesla off the stock market and return it to private investors. And he’s right. Going private is exactly what Tesla needs right now to avoid a death spiral.
“TAKING TESLA PRIVATE… FUNDING SECURED”
Musk first hinted about his ambition to take Tesla private in August 2018. In a now infamous tweet, he said “Am thinking about taking Tesla private at $420. Funding secured.”
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
The tweet landed him in hot water with the Securities and Exchange Commission (SEC). The Commission accused Musk of fraud, claiming the “funding secured” tweet was “false and misleading.”
3 REASONS TESLA SHOULD BE A PRIVATE COMPANY
Although Musk is resigned to keeping Tesla public, it’s the wrong decision for three reasons:
- Tesla is forced to perform to an arbitrary quarterly earnings cycle rather than focusing on long-term ambition.
- Tesla is open to short-sellers which ravage Tesla and its stock (and Musk can’t stop baiting them).
- Tesla still operates like a startup. It needs time to experiment and mature.
Let’s go through them one at a time.
1. TESLA SHOULD FOCUS LONG-TERM, NOT QUARTERLY REPORTS
Being public means delivering knock-out performances every single quarter. But a company like Tesla should be looking five years in the future.
Listening to Wednesday’s earnings call, you could sense this conflict in Musk’s delivery:
“If we were to fully optimize for profitability in Q2, I think we could do it, but then we would be unable to unwind this crazy wave of deliveries.”
Rather than focusing on Tesla’s long-term strategy, Musk is being forced to think about how to appease investors in the next three months.
Stock price is noise generated by commercial investors scratching their heads because they don't get what he's trying to do. Main reason Tesla should've been private, but here we are. It's not just about profits, although they are of course essential.
— Mark B (@voytechs) April 25, 2019
Going private would allow Tesla to ditch the quarterly pressures and get back its ambitious roots. Elon Musk himself admitted:
“Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term.”
2. SHORT-SELLERS RAVAGE TESLA ON PUBLIC MARKETS
Tesla is notoriously one of the most shorted stocks on the market. There is an entire community on Twitter dedicated to betting against Tesla, known as $TESLAQ.
The sheer volume of shorts means there’s an incentive to find and spread negative angles on Tesla for financial gain. As one analyst explains:
“[Short sellers] puts downward pressure on the stock, and that’s not good, when your daily report card is the stock price.”
Elon Musk’s war with #Tesla's short sellers just got weirder as shorts rise again. The electric carmaker claims a California man who it says is part of an online group of short sellers has been stalking its Fremont factory and harassing its employees. https://t.co/s9YMZBU1QN pic.twitter.com/vhp95qOHSh
— Holger Zschaepitz (@Schuldensuehner) April 22, 2019
More importantly, Elon Musk gets massively distracted by short-sellers. He constantly baits them and interacts with them.
The constant obsession with short-sellers and stock price volatility is pulling Elon Musk’s attention in all the wrong directions.
Oh and uh short burn of the century comin soon. Flamethrowers should arrive just in time.
— Elon Musk (@elonmusk) May 4, 2018
3. TESLA STILL OPERATES LIKE A STARTUP
Companies typically go public when they are sufficiently grown, stable, and somewhat predictable.
While Tesla is a large, well-capitalized company, it still operates like a startup. Its forecasts are volatile and unpredictable. Tesla constantly shifts focus and explores new directions in a mission to define the future of driving.
Going public means there’s less freedom to experiment which is Tesla’s modus operandi.
Ultimately, Tesla should go private while it hones and defines the company. And as Elon Musk said, the company could return to the public markets at a later date:
“In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.”
Elon Musk Ports Epic’s Unreal Engine to Install Fornite in Your Tesla
By CCN: Worried Telsa CEO Elon Musk wasn’t packing his cars with enough feature? The tech pioneer wants you to be able to play top video game titles in his vehicles. Tesla is definitely porting over Unity and Epic’s Unreal Engine, that Fortnite and Rocket League, run on. Musk also tweeted Microsoft and Roblox to see if they want to be involved too.
Also porting Unreal Engine
— Elon Musk (@elonmusk) May 19, 2019
Kik’s CEO: Firm Spends $5 million after SEC Negotiations
- SEC announced that the sale might have violated U.S. security law.
- Livingston does not plan on suing SEC, yet he seeks clear guidance from it.
Kik’s CEO reported that the company had spent $5 million after its engagement with the U.S. Securities and Exchange Commission (SEC). The regulator claims that it was an unregistered securities sale.
Founded by a Canadian entrepreneur Ted Livingston in 2010, Kik is a messaging app that garnered $98 million in an initial coin offering (ICO) at the end of 2017. Later, SEC announced that the sale may have violated U.S. security law and that SEC staff would suggest bringing an enforcement action against the company. Livingston reported on Thursday that his firm and the regulator have been in talks since late 2017. He said:
“We’ve spent a lot of money on this, over $5 million. We’ve spent a lot of time on this, we’ve spent the last 18 months traveling to Washington.”
SEC had filed a formal letter known as the Wells notice in November 2018 to which Kik replied that the company highlighted a clause in existing law that says currencies are not securities. Livingston said:
“In the last month alone, over a million people earned kin from 40 different apps, from 40 different companies. Over a quarter million people used kin, making it the most-used cryptocurrency in the world, and they’re not even willing to say that’s not a security.”
Livingston said he does want to work with the SEC, however, he said, “We want to find a win-win with you, we understand the tough position you’re in, but at the same time innovation needs to move forward.”
Regulatory uncertainty may be holding back the U.S. cryptocurrency industry.
ConsenSys CEO Predicts Trump Re-Election, Facebook Breakup and Crypto Revival
It was 2047, not 2019, in ConsenSys CEO Joseph Lubin’s keynote address Saturday in Red Hook, Brooklyn.
To close out the 2019 Ethereal Summit in Brooklyn, he foresaw a future where assets had all been tokenized, the web was completely decentralized and networks organized around topical interests had become roughly as important to human life as nation states.
Notably, Lubin predicted President Donald Trump would win a second term in 2020.
He foresaw those following four years as marking a downturn in American civilization, marked by an increase in radical divisions and even hate crimes. The turnaround would only arrive, he predicted, when Facebook, “finally admitting its role in global radicalism,” broke itself into “Facebook Media” (the news feed) and “Open Book,” a decentralized social web that any startup could tap into.
In Lubin’s vision, most of the progress since 2019 can be linked back one way or another to ConsenSys, despite a 2018 that ended with broad layoffs and challenges in spinning out incubated startups.
Lubin foresaw a medium-term future where, as he put it from his 2047 perch, “Liberal democracy was on its death bed.”
Despite doubts about ethereum’s potential to change how data is shared, he particularly foresaw a new era in more sustainable, more valuable journalism. “Platforms like Civil triggered the recovery of the journalism industry, especially local journalism,” Lubin said.
Civil is a ConsenSys-supported project aiming to bring distributed verification and micropayments to the media industry.
He continued, “Divorcing news delivery from the influence of advertising dollars was the breakthrough that drove the turnaround of western democracies.”
Lubin described a decentralized era in which “ethics with respect to the truth, ethics with regard to the nature of facts” took hold, as opposed to our backwards era, in which “presenting balanced viewpoints and fostering critical thinking was anathema.”
By 2047 – with a decentralized open platform where former web giants had come to embrace a distributed ethos – “We are all as a society able to engage in direct democratic decision-making,” Lubin said.
“The dream has been made real and we are all in it,” the Lubin of 2047 said. He told the crowd:
“These days we don’t hear people talking about changing the world, just like we don’t hear people talking about breathing or walking. It’s just what we do.