Tesla’s Biggest Problem Is Busy Tweeting
Today’s Agenda
- Going private won’t be simple for Tesla.
- Having a better CEO, or board, would help Tesla more.
- Democrats are winning by going mainstream.
- Insurers face a worse new threat than Amazon.
- The housing market helps explain why the recovery has been so unsatisfying.
How Do You Solve a Problem Like Tesla?
(Bloomberg Opinion) -- Tesla Inc. is haunted by expectations. Investors expect it to grow until the heat-death of the universe, trailing galaxies of profits in its wake. Its stock price is so inflated that a growing crowd of skeptics expects it to burst soon. CEO Elon Musk only feeds the high hopes, trying to burn vexing short-sellers and dry-question-asking analysts and journalists. But Tesla can't meet the market's lofty goals yet. So Musk's solution, laid it out in a tweetstorm yesterday, is to just go private! Leave pesky shorts and quarterly earnings targets and conference calls behind forever.
Ah, but it’s not that simple, as Matt Levine writes. For one thing, contra Musk, it’s not clear Tesla actually has the financing to go private. (Bloomberg News reported today, as Matt sort-of predicted, that Musk talked to SoftBank about a take-private deal last year. But those talks have reportedly ended, and Tesla is still public.) Shouldering the sort of debt that might be required for an LBO of a $60 billion company isn’t really an option for Tesla, which burns mountains of cash.
And it’s a good thing Tesla is public anyway, writes Stephen Gandel: The equity market has been almost comically generous to Tesla, driving its stock price to 128 times expected 2019 earnings (compared to 7 for Ford Motor Co.). What a burden! Going private would vaporize Tesla's credit-default-swap buyers, as Brian Chappatta writes. But an even larger swarm would gather around the even bigger new debt pile to take their place, Stephen notes.
The real driver of Tesla's distress is not the public market but, as Matt and Stephen point out, Musk himself – a “thin-skinned CEO who turns into a public relations disaster under the slightest of heat,” as Stephen puts it. “The distraction is coming from inside the house!" Matt writes.
Tesla's board, meanwhile, is basically useless, suggests Liam Denning. Nearly a day after Musk's tweetstorm, it rolled out of bed and released a vague, 57-word statement that it would get right into looking into this whole going-private thing. In just 341 characters, it raised as many troubling questions as Musk’s flurry of 180-character tweets did the day before, Liam says. It's hard not to think the likeliest resolution of all this is the long-overdue rupturing of Tesla expectations.
Bonus Tesla reading:
- If Musk isn’t smacked down for his tweets, then other CEOs will copy him. – Lionel Laurent
- The auto company that should really go private is BMW AG. – Chris Bryant
More Midterm Tea Leaves
Democrats had a good showing in last night’s primaries and a special congressional election in Ohio, the latest sign Dems are strong favorites to take Congress in November, writes Jonathan Bernstein. Notably, most Dem primary winners, yesterday and throughout the season so far, have been well to the right of Bernie Sanders, notes Al Hunt, who thinks this gives them a better shot of winning general elections in such places as Ohio and Michigan.
You’d think Republicans might want to harp on a strong economy in November. But it’s not strong enough to give them much of an edge, Ramesh Ponnuru suggests. In fact, he argues, Democrats are better talking about economic issues, while Republicans can get out the base by focusing on grievances.
Cutting Health-Care Costs
Insurance companies got in a bit of a panic recently over news that Amazon.com Inc., Berkshire Hathaway Inc. and JPMorgan Chase & Co. would unite to focus their massive combined buying power on the health-care market. While that Voltron has yet to get off the ground, Max Nisen points out similar threats to the insurance companies are already buzzing: General Motors Co. became the latest in a string of big employers to negotiate for health-care services directly with providers, cutting out the insurance middlemen.
Some suggest consumers could help cut health-care costs by shopping around for, say, the cheapest MRI provider. But who’s got time for that? A simpler approach might be to get doctors to recommend cheaper providers instead, writes Peter Orszag.
The Economy, Stupid
In one chart, Noah Smith sums up one of the biggest problems of the recovery from the great recession:
Stocks have bounced back much more robustly than housing. Working-class Americans have most of their wealth tied up in housing, which helps explain why they have suffered much more than upper-class Americans, who own more stock. “For half of the country, the housing collapse destroyed a 60-year story of the American dream -- no wonder so many people are turning to populism and socialism,” Noah writes.
On the bright side, factory jobs have been enjoying a quiet renaissance, notes Conor Sen. That and a strong employment recovery for less-educated workers suggests “we shouldn't be so sure that the labor market's inequality is inevitable.”
Chart Attack
As if Papa John’s International Inc. didn’t have enough trouble with, you know, Papa John, its business is pretty terrible too, writes Sarah Halzack.
Snapchat is becoming just like the regular old Internet – good news for Snap Inc. revenue, but a betrayal of the founding values that attracted young users in the first place, writes Shira Ovide.
Quick Hits
If Zimbabwe is to recover from Robert Mugabe’s rule and fix its economy, outsiders can help, but Zimbabweans must do the heaviest lifting. – Bloomberg’s Editors
China’s mistreatment of Uighurs could be the ruin of its belt-and-road scheme. – Mihir Sharma
Israel’s “heavy-handed, amateurish” crackdown on dissent is counterproductive. – Daniel Gordis
Leavers should realize that fighting Theresa May’s compromise Brexit proposal only makes a Brexit reversal more likely. – Clive Crook
ICYMI
Saudi Arabia is dumping Canadian assets. Chris Collins, Trump’s first supporter in Congress, was arrested on insider-trading charges. China set a date for trade-war retaliation.
Kickers
What it’s like to stop believing in aliens.
We are in the twilight of the celebrity chef era.
The revamped “Nancy” is the perfect comic strip for 2018.
The Ringer introduces its Soccer Watchability Rankings.
The Ringer also introduces its Shark Movie Matrix.
Note: Please send comic strips, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.
Timothy L. O’Brien is the executive editor of Bloomberg Opinion. He has been an editor and writer for the New York Times, the Wall Street Journal, HuffPost and Talk magazine. His books include “TrumpNation: The Art of Being The Donald.”
©2018 Bloomberg L.P.