Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

Musk’s Carelessness Bites Tesla (TSLA) Stock (Again)

By Gene Munster

Last night, the SEC asked a judge to hold Elon Musk in contempt for tweeting that Tesla (TSLA) would produce 500k cars in 2019. The message was not approved by the company beforehand, which is one of the conditions from Musk’s settlement with the SEC in October. Musk later corrected the tweet to say the company will probably reach a 500k production rate. It’s unclear what the potential penalty would involve if Musk is held in contempt.

Musk’s behavior remains careless. In this case, the tweet wasn’t as careless as the disrespect for the process he agreed to in the October settlement. He should expect to be under an unforgiving microscope not only because of his prior settlement with the SEC, but also because he publicly stated he didn’t respect the organization after the settlement. While this tweet (after market hours) and the quick correction seem innocuous, the SEC isn’t likely to cut Musk any slack. When you make things personal, it’s not just personal for you.

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It seems investors still view Musk as a net positive as part of the company, although we expect the debate of whether Tesla is better off without Musk will return. We still view Musk as a net positive for the company given four key constituencies:

  • Investors: net negative for the overall story given volatility incurred by his actions.
  • Product: net positive for product vision and pace setting for production.
  • Customers: net positive for his focus on pace of innovation and delivering great customer experiences.
  • Employees: net neutral – positive among rank and file, negative for recruiting and maintaining senior management.

This new SEC situation reminds us of a note we wrote last October about how Elon’s need to win every battle might cost him the war, and when strengths in excess become weaknesses. A healthy disregard for the rules is what makes Elon, Elon. It lets you start an electric vehicle company when no one believes it can be done. When you’ve “made it,” rules become more important. Musk’s unwillingness to follow the rules is part of what you have to be willing to accept as an investor in Tesla.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. 


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