The bizarre, contentious call was dubbed by one Morgan Stanley analyst “arguably the most unusual call I have experienced in 20 years,” and several experts on CEO communications, investor relations and corporate governance agreed: Such behavior creates market risks, can erode confidence and raises questions about what analysts will learn about the company in the future. In addition to the criticism of analysts' questions, Musk interrupted his chief financial officer and called out journalists for what he described as misleading readers.
“I don't think there’s a more bizarre earnings call I’ve listened to, been part of or trained people for,” said Paul Argenti, who studies corporate communication strategy at Dartmouth College's Tuck School of Business. “I know we live in a time of strange communication, starting at the very top with the president.” he said. “But, come on, some decorum is necessary when you’re in a leadership position.”
“Breaking the script is what the guy has always done,” said Greg Miller, a professor at the University of Michigan's business school who studies financial communications. “There's a reason we call it 'on the edge,' " he said, “Riding right up to it might be a good strategy, but stepping over it like they've done with this and the April Fool's tweets starts to risk your relationship with the markets.”
Indeed, Tesla's stock fell more than 8 percent in trading on Thursday before recovering and closing down 5.5 percent. At least one analyst suggested the behavior could have implications. “It's an incredible red flag and we are reevaluating our stance on the company as a result,” said Jamie Albertine, an analyst for Consumer Edge Research, in an interview on CNBC. An email to Tesla to comment for this article was not immediately returned.
On Friday morning, in a series of tweets, Musk noted that “it’s important to know that Tesla is the most shorted (meaning most bet against) stock on the market.” He said he didn’t answer Sacconaghi’s question because it had been addressed in a prior letter and that the second was “absurd” because “Tesla has roughly half a million reservations, despite no advertising & no cars in showrooms.”
While chief executives can be irreverent on Twitter or eccentric in how they talk to some groups, Wall Street expects to see “rational, dispassionate demeanor” in an earnings call, said Charles Elson, the director of a corporate governance center at the University of Delaware.
Doing otherwise can “lessen analysts' confidence in your ability to lead the company forward,” Elson said. Yet unlike other companies that might put the chief financial officer forward if the chief executive doesn't want to do earnings calls, Musk's personality is so tied to the company that it would raise more questions if he delegated the job.
“It makes sense that he do the calls,” Elson said. Investors — just like so many others — want to hear what he has to say.
At the beginning of the call, Musk said he was going to “try to answer as many questions as possible” and “we're going to go as long as there are good questions to answer.” In a letter preceding the call, Tesla had said it expected to generate cash and profit in the third and fourth quarters if it executes its plans to increase output.
Musk panned their approach, but “the questions the analysts were asking were no different than the questions you see them asking of any other mature company,” Miller said. “It's not unreasonable of them to ask these.”
And, said Noah Zandan, who leads an advisory firm on leadership communications, Musk's unusual comments “served as a distraction from some of the positive performance things that Tesla was talking about when it comes to production,” he said. “That message did not come through because there was so much media that picked up the noise.”
Miller said the fallout could be twofold. Not only may analysts now “know he has disdain” for some of their questions, but they may also feel as if questions aren't being answered. “If you're an analyst, now you’ve got to wonder, going forward, what kind of information am I going to get? And what kind of information am I not going to get?”
Context didn't help, either. Coming in the aftermath of his April Fool's prank, which at least one analyst said was not “a joking matter,” Miller said Musk is sending a message to them “that I find you both humorous and annoying. I don’t think that’s a good message in any relationship.”
Because analysts act as information intermediaries for institutional investors, providing an opinion — even if it's often wrong — about a company's future, “it's crucial to have a good relationship with them.”
Even if Musk is known for his unconventional approach, that doesn't mean he has to be that way in every circumstance, said Davia Temin, a communications and management coach on leadership issues.
“If your personal brand is as an iconoclast, there’s a tendency to want to be seen as an iconoclast on everything, but that’s not what really works,” she said. “You want your product to be the thing that stands out. Not your demeanor on an earnings call.”