Actionable news
All posts from Actionable news
Actionable news in GM: GENERAL MOTORS COMPANY,

Tesla: Musk's Modus Operandi, And A Possible Future Risk


Earlier this month, venture capitalist Josh Wolfe shared an insightful sketch of Elon Musk's modus operandi: In Wolfe's telling, Tesla shareholders are essentially philanthropists, with the potential return that entails.

In addition to Wolfe's theory, which went mostly under the radar, we highlight what may be a currently underappreciated risk for Tesla as well as other car makers.

We also look at the current cost of hedging Tesla relative to the cost of hedging an industry competitor as a gauge of risk.

Elon Musk's Modus Operandi

Venture capitalist Josh Wolfe shared an insightful

about the big picture behind Tesla (NASDAQ:TSLA) CEO Elon Musk's master plans earlier this month on Twitter (NYSE:TWTR). I bookmarked it at the time, and looking at it again in preparation for writing this article, I was surprised Wolfe's lead tweet in his tweet storm had been shared fewer than 50 times. I was surprised because Wolfe's theory explains a lot about the disconnect between what Musk promises and what he delivers. First, a bit of context.

What is the purpose of a bond or a stock? If your answer is "to help investors build wealth," perhaps you should be more cynical. The purpose of stocks and bonds is to raise money for corporations and governments. The aftermarket for both types of securities doesn't raise money for issuers, but it supports demand for new issues. That investors can build wealth by buying these securities is true, but that's not why they were offered in the first place.

With that context in mind, here is Josh Wolfe's theory, in a nutshell: Musk's every-more-grandiose promises and plans are his way of getting his investors (Hofferite "True Believers" in Wolfe's view) to give him more money to paper over previous losses at Tesla and SolarCity (NASDAQ:SCTY). Wolfe sketches this out in the...