Well,
it's been another interesting week for Elon musk on top
of losing his title as the world's richest man,
richest person we should say Tesla investor is pushing him to focus more on the E. V.
Company which has lost more than half of its value
this year alone.
Now,
all of this amid reports of production cuts
and now shortened shifts at the shanghai factory,
which may signal that Tesla is turning some of its attention
away from china due to decreasing demand in the region.
Well, I'm joined now by our resident Tesla expert Dan Ives,
I'm managing director of equity research at Wedbush Securities dan.
Always a pleasure. Great to see you on a friday. What do you make of all this?
I mean like it's been just a
massively frustrating story for Tesla investors because it's
at a time where china clearly is going
through some challenges from a demand perspective,
I think Tesla can navigate through and I still think
there's a massive strength on the other side of this,
but it just feels like the attention continues to be
on twitter and I think it's the musk brand.
I mean the musk brand is key to Tesla's brand
and I feel like, you know, that's taken significant hits
ever since the twitter circus show started.
Yeah, well,
I guess I can guess your answer to my next
question considering that you just called it a circus show,
but was it a mistake for Ellen must by twitter
now, look,
I mean from his perspective he gets about freedom
of speech and the richest person in the world.
Second person, you know, he could do what he wants.
But from a Tessa perspective from an overall ecosystem, you know,
I think it was it was a disaster move, right?
I mean it's our view that it's probably gonna be the
most overpaid tech acquisition in the history of deal making.
So
you know, as good as it seems in terms of tweets and like you know,
we continue to see it from mosque
on a daily basis.
It's more frustrating relative to what is the golden
child of the ecosystem is Tesla and again,
selling Tesla stock to fund twitter selling diamonds to
ultimately by $2 less in new york city pizza.
So I just wanted to look here.
So shares at General Motors for instance, stand down 37% this year,
certainly automakers across the board,
you could add four to this mix and plenty
of other ones they have suffered during this pandemic
simply because of the state of the economy,
but also the massive semiconductor shortage.
So just to put it into context for a viewers, I mean, I think
that's some factor clearly at play here,
but we should also remind our viewers and I'm sure you have the numbers, that
one reason that Tesla might be
underperforming this year despite outperforming for
so long is because must did have to sell a considerable portion
of that stock to actually fund this twitter deal, right?
Look, I think that's part of it,
that that's a big part in terms of that
overhang and that overhand continues to be there,
right in terms of, does he have to sell more stock,
especially at twitter's in the red?
I think the bigger problem is, look,
it was a Cinderella ride for 3 to 4 years for
Tesla and now at the time that they're going through challenges,
you don't want to pile it on the plane to be
sitting there on twitter while you're going through the store.
I think that's part of the problem perception to reality
and a big part of the Tesla premium.
It's the musk premium that that's what investors are paying for.
And I think that's why you've seen some bloom come off
the rose in terms of that multiple and Tesla stock,
but of course macro recession, everything else, I think that's why, right, this is
exacerbating.
So here's another question for you.
I know, um,
reportedly we heard today that musk's bankers wayne these
margin loans to cut some risky high interest debt from
the twitter deal. How technically would that work?
What would that mean for shareholders and what are the overall implications?
I think we still need to understand details of that.
I think the bigger concern is,
does that result in most having to some more Tesla stock, you know,
from a marginal and perspective,
what ultimately would he have to put into collateral and I think as we know,
what's happened with twitter despite the activity is, you know,
as I covered towards a public company
as advertisers have definitely gotten more cautious.
That essentially means despite the headcount cuts,
it's more red ink for twitter now. How is that fun? Is that musk? Is it partners?
Does that mean the ssl more Tesla stock?
That's why this has just been overall black cloud and
the story in what's been a very jittery markets.
The last thing you want to see,
even though it's clearly entertaining knows must continues to
go on as sort of twitter,
you know, strategic launch.
So one of the reasons that we've seen the stock market down this
week dan is mounting concerns that a recession is on the horizon.
Of course we've been hearing the dreaded recession word all
year long but it seems like the odds are increasing,
that we might see one at least among the calls here on Wall street in the year ahead.
How would that impact Elon musk's companies?
Is that more pain ahead potentially for a Tesla and even a twitter?
Well, I think specifically for for Tessa,
I think you're already starting to see that play out in china.
It's not just Tesla, but even in domestic players, Neo x ping and others.
But I think the question is how long and how deep the recession is because, you know,
you can make an argument that Tesla could emerge stronger coming at this.
And in terms of what we see with the potential boom toward E. V. In 2023 24
beyond. But they need to ultimately navigate the recession.
And that's something I think you're starting to see play out in
china and that's why some of the growth concerns are happening now,
twitter.
Of course that would be less advertising.
And I think right now, I mean musk is juggling audibles.
He's been able to multitask better than probably anyone in the world.
But I do feel like investors want to see him focused on Tesla
and not twitter and perceptions of reality in terms of this market.
What sort of focus does Elon must need to bring
to Tesla if a recession is on the horizon.
And amid these recent reports stand that
demand is starting to wane in china where Tesla has its
reported most important gigafactory, they're based in shanghai,
I think it's getting ahead of it.
If that's price cuts more efficiency in the factory,
making sure that you don't have too much inventory.
You know,
I think also trying to understand how the tax credits are going to
work in the US what that ultimately means from a demand perspective.
Look, I think
the Tesla, you know,
along with Apple probably to the most transformational names over the next decade,
but for musk now it's a it's a period where it's a fork in the road.
And I think Navigating Tessa through the storm
is what investors really want to see here.
And I think that's going to really be the key in terms of over the coming 36 months,
you know, four must.
All right, dan. I've always good to see you.
We always appreciate your take, especially on a busy friday afternoon. Thank you,
dan is the managing director of Equity Research
for Securities.