Stephen Vines

The View | Elon Musk’s ‘bonehead’ moment shows tensions between visionary CEOs and short-sighted shareholders

Stephen Vines says it’s hardly unusual that an entrepreneur like the Tesla and SpaceX CEO would clash with investors, who have become conditioned to expect near-term reward in their dividend payments, while Musk wants to invest in the future

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Elon Musk speaks at a press conference following the first launch of a SpaceX Falcon Heavy rocket at the Kennedy Space Centre in Cape Canaveral, Florida on February 6. Photo: Reuters

Stephen Vines

Published: 1:30pm, 9 May 2018Updated: 10:45pm, 9 May 2018

There was something rather magnificent or maybe simply annoying about Tesla CEO Elon Musk’s explosion during the latest quarterly earnings call when he castigated an analyst for asking “boring, bonehead questions”.

The analyst wanted to know whether Tesla would be seeking to raise more capital, an arguably reasonable concern as the company is burning through US$1 billion per quarter with the prospects of profitability somewhere on the far horizon.

Musk’s response triggered an equally explosive response in the stock market, causing Tesla’s share price to plunge by almost 6 per cent in a single day.

So, what’s happening here? Musk, a visionary, who made the launch of electric cars a commercial reality and has now set his sights on space travel, is a big-picture guy. He is impatient with pesky analysts who want to see a rapid return on investment and are far more interested in the financials than they are in the vision.

Were it the case that Musk was all vision and no commercial sense, the calculator wielders might have a better point. However Musk has already delivered some stylish vehicles, which are in high demand – so high that Tesla’s current production problems with a new, cheaper model are frustrating many potential customers.

There is another qualifying point here, which is that unlike most of the other promising, but slow to get off the ground start-ups (Amazon comes to mind here), Tesla has heavy capital requirements because vehicle production requires a great deal of costly plants and machinery.

Musk is frustrated because market folk are focused on the share price and possibly dividend income, while he is focused on the long term and believes that what can be created in this longer term should not be at the mercy of those whose sole interest is short-term gain.