Elon Musk: The man OR myth worth the hype?

Let’s start the article with the EPS of Tesla. For a while, you may take EPS synonymous with the profit if EPS gets too technical. The snapshot of the Bloomberg Terminal does show that the company has made profits in 5 quarters after it went public in 2010. Out of 40 quarters (10 Years), the company has made a profit just 5 times (The fifth upward stick is missing from the chart. It was in 2013). There are multiple companies or organizations that are just bleeding money for the last many quarters and we wouldn’t be talking specifically about them but the bottom line remains that Mr. Elon Musk is inching towards to become the ‘Real Iron Man’ of this era. Hence, it becomes more important to understand and know more about the revolution that is underway for a decade now.  

(Note: The title of ‘Real Iron Man’ was first used by Bloomberg on Jun 10, 2014, to refer Mr. Musk)

There are 10 points that summarise Mr. Musk and the company itself. In the latter points, I have even mentioned Indian automobile companies justifying the header image with the data file too.

1.    The electric-car maker posted a surprise profit of $342 million in the third quarter of 2019. Wall Street had expected the company would post a net loss as big as $257 million. Tesla (TSLA) shares soared by up to 20% in after-hours trading. It marked the first quarter Tesla was profitable since the company posted back-to-back profits in the second half of 2018. Before that, Tesla had posted profits only twice since it went public in 2010 — once in 2013 and again in 2016.

2.    Tesla delivered a record 112,000 vehicles globally during the fourth quarter, significantly topping Wall Street estimates and achieving CEO Elon Musk’s year-end sales goal.

3.    Many analysts does believe that Tesla is ‘OverValued’. They are quite cautious about the company as they still haven’t settled for something that could be relied upon for a steady flow of revenue.

4.    The Tesla Gigafactory in Shanghai opened last year as China's first wholly foreign-owned auto production plant since the government eased regulations, and the sedans delivered this week were Tesla's first made-in-China cars to be shipped out to customers. The Chinese government lifted restrictions on foreign ownership for auto manufacturers in 2018. Previously, foreign carmakers could only produce and sell in China through joint ventures with Chinese companies.

5.    Influence of charismatic CEO: In the recent Bloomberg survey (https://www.bloomberg.com/graphics/2019-tesla-model-3-survey/market-evolution.html) _November_2019, a question was asked to around 5000 Tesla owners. Question: Did the opinion of Elon Musk influence purchases? 55.4 percent responded affirmative (30.8 percent- strongly agree, 24.6% agree).         

6.    Controversies: Elon Musk on 07 August 2018: Tweet: ‘Am considering taking Tesla Private at $420. Funding secured’ His tweet “set off a trading frenzy,” and pushed Tesla’s stock price up more than 6 percent, forcing Nasdaq to halt Tesla trading for 90 minutes until the company gave an official response. The company’s stock price hit the intraday high of $387 before closing at $379.57 on the day of the tweet. It's currently trading at 478.15 10 Jan, (7:59 pm GMT-5, 10 January, 2020·The US Securities, and Exchange Commission (SEC) sued Mr. Musk after his tweet. The SEC later claimed that the tweet was “false and misleading.” 

Outcome: Mr. Musk was directed to step down as chairman. Paid a fine of 40 million. Appointed 2 independent directors; Was directed to get his tweets reviewed before posting.

Other incidents include him smoking weed on Joe Rogan Podcast and calling Vernon Unsworth, the diver, in July 2018, a pedo guy in one of his tweets.

7.    China can be the swing factor for Tesla: The forecasted growth for the EV share for China is quite high. It is as high as 27 percent. Also, Tesla delivered its first China-made cars to its customers and it has come when Mr. Musk has been very popular in missing his deadlines.  

Tesla Killers in the Chinese market are  NIO, XPENG, GEELY, BYD

                

8.    The combined valuation of Tesla has eclipsed the total market cap of Ford and General Motors combined.

9.    The combined valuation of Tesla has eclipsed the total market cap of Ashok Leyland, Bajaj Auto, Tata Motors, Maruti Suzuki and Mahindra & Mahindra combined.

{Just for info: In the middle of these, Morgan Stanley Sales & Trading, US, has picked Maruti Suzuki India as one of the world’s top 20 stocks. According to a recent report released by Morgan’s trading arm, India's car market leader is best positioned when demand picks up.}

10. Tesla has become the 3rd most valuable company in the world after Toyota ($228Bn) and Volkswagen ($100.8Bn).

Tesla stock has doubled since October 2019. It may have eclipsed the valuation of major automobile firms but the fact remains that sale wise, it accounts for just 3 percent of joint vehicle sales volume (Ford and GM). The execution risk more than ever. And the fact remains that the company is about to report its 10th annual consecutive net loss (In the first para we had talked about quarters)

Till then, let’s see how things unfold for Tesla and the legend, Mr. Elon Musk.\

The excel sheets have been attached to this link for further references: File

The Article may be downloaded as pdf from the following link

Reference:
1.    https://www.investopedia.com/terms/e/eps.asp
2.    Bloomberg Technology – Taylor Riggs
3.    https://www.bloomberg.com/graphics/2019-tesla-model-3-survey/market-evolution.html
4.    https://www.flaticon.com/free-icon/dollar-symbol_189672#
5.    https://www.value.today/world/world-top-500-companies?title=india
6.    https://www.business-standard.com/article/companies/maruti-suzuki-overtakes-hindustan-unilever-in-market-cap-race-117121901062_1.html
7.    https://in.finance.yahoo.com/quote/TM?p=TM&.tsrc=fin-srch    

Tweets that Shook Fortune 500 Companies

1. Tencent:

Daryl Morey (General Manager of Housten Rockets) on 04 October 19:

Tweet: “Fight for Freedom, Stand with HongKong” 

As Yao Ming from Shanghai, China was selected for Housten Rockets for the 2002 NBA, things changed forever for Basketball as a game in China. It Boosted the league’s popularity. The following data very explicitly do the talking: 

2015: Tencent acquired exclusive digital streaming rights for NBA games in a 5-year contract worth $500 million  ($100 million per year)

2019: The tech giant extended the rights to 2025; Contract worth $1.5 Billion ($ 300 million per year)

Viewership for NBA Games in China (650-750 million) is almost 5-6 times that of the US (90-110 million). Just for a comparative perspective, IPL Season 2019 had a viewership of 462 million, and the entire population of the US is 372.2 million. 

But the tweet didn’t auger well. Chinese Consulate in Housten responded by saying that they were ‘deeply shocked by the erroneous comments on HongKong’ 

For the damage control, Mr. Morey took down the tweet, players apologized and expressed their love for China and their fanbase. But perhaps it was too late. 

Smartphone Maker VIVO, broadcaster CCTV, and internet giant Tencent suspended all cooperation with the NBA or Housten Rockets itself. This had a significant impact on Tencent as a listed company. Alibaba ($ 435 Bn) and Tencent ($ 398 Bn) are just the 2 Non-US and Chinese companies that make into the US-dominated ‘List of public corporations by market capitalization.’ With the recent developments, the gap with Alibaba has widened much further. 

China has made it very clear that they don’t like others to meddle in their issues like HongKong or 3T (Taiwan, Tibet, and Tiananmen). There is a price that needs to be paid if done so, and now there lies a risk of importing Chinese Censorship along with profit that organizations look forward to reap because of the presence of 1.4 Billion people that China has and can really make a difference.

2. Tesla:

Elon Musk (Needs no introduction) on 07 August 2018: 

Tweet: ‘Am considering taking Tesla Private at $420. Funding secured’

His tweet “set off a trading frenzy,” and pushed Tesla’s stock price up more than 6 percent, forcing Nasdaq to halt Tesla trading for 90 minutes until the company gave an official response. The company’s stock price hit the intraday high of $387 before closing at $379.57 on the day of the tweet. It's currently trading at 350.43 (As of 7:37 pm GMT, 14th November 2019)

 The US Securities and Exchange Commission (SEC) sued Mr. Musk after his tweet. The SEC later claimed that the tweet was “false and misleading.” 

Outcome: Mr. Musk was directed to step down as chairman. Paid a fine of 40 million. Appointed 2 independent directors; Was directed to get his tweets reviewed before posting.

As the public face of Tesla, Musk had gained legions of fans for his bold approach to business and technology, and it can be expected that he is going to be around Tesla for many years to come. This is in the interest of the company also. In the recent Bloomberg survey, a question was asked to around 5000 Tesla owners. 

Question: Did the opinion of Elon Musk influence purchases? 55.4 percent responded affirmative (30.8 percent- strongly agree, 24.6% agree). 

3. Apple:

David Heinemeier Hansson (partner at Basecamp, a web-based software development firm on 07 November 2019 

Tweet:  “The @Applecard is such a f*****g sexist program. My wife and I filed joint tax returns, live in a community- property state, and have been married for a long time. Yet Apple’s black box algorithm thinks I deserve 20x the credit card limit she does. No appeal work.”

Steve Wozniak, too, responded on the same affirming that he and his wife also had experienced something similar. The tweet garnered much attention

 The apple credit card launched in partnership with Goldman Sachs earlier this year uses an algorithm to assign credit limits, and many online pointed out that it may favor men over women. The issue has been taken into, and has led to an investigation from New York’s Department of Financial Services over the issue of gender discrimination.  

An interesting thing happened when I was reading about Mr. David. He is a Le Mans Class-winning racing driver. And co-incidentally I  happen to be at Le Mans circuit currently as I am posting this on my blog. 

Mr. David can be reached @dhh on Twitter and is unavailable at other social media platforms. 

Note: 

a. The viewership data quoted are subject to  much of deviation depending on the methodology adopted and source choose. I have tried to get a median number for higher degree of accuracy. 

b. Mr David in his tweet had used the full 'f' work instead of using * symbols

References: 

1. https://en.wikipedia.org/wiki/List_of_public_corporations_by_market_capitalization

2. https://dhh.dk

3. https://www.marketwatch.com/story/new-york-regulator-probes-apple-card-algorithms-for-gender-bias-after-viral-tweets-2019-11-09

4. https://www.google.com/search?client=safari&rls=en&q=population+of+US&ie=UTF-8&oe=UTF-8

5. https://www.youtube.com/watch?v=GHpFjtuAYLQ

6. https://www.google.com/search?client=safari&rls=en&biw=1440&bih=837&tbm=isch&sxsrf=ACYBGNRvzvj8FA9EpwKiUxfSVyqwaiKe7w%3A1573769513232&sa=1&ei=KdHNXdLsDfHQxgOkl5zADw&q=twitter+and+companies&oq=twitter+and+companies&gs_l=img.3...478280.482133..482775...2.0..0.161.1232.22j1......0....1..gws-wiz-img.......35i39j0i67j0j0i8i30j0i24.MoYkgxyPiik&ved=0ahUKEwiSpa2m3OrlAhVxqHEKHaQLB_gQ4dUDCAY&uact=5#imgrc=UazTxIe5l0STlM:

Profit, Parliament and Privacy

The Parliament session is scheduled from November 18 to December 13. And there is one crucial bill, pending that’s going to affect each and everyone in some manner. 

“Personal Data Protection Bill”

The report drafted by Justice BM Srikrishna committee, which also had our former director of IIM Indore, Prof. Rishikesh T Krishnan as a member too, has heavily influenced the bill, though there are remarkable deviations too which will not be explored in this article.  The report may be found here: https://meity.gov.in/writereaddata/files/Data_Protection_Committee_Report.pdf

The proposed law mandates storing of personal data within the territory of India requires to obtain explicit consent from the users to collect and use their data and proposes of setting up of Data Protection authority to decide on violations of a data breach. It also proposes a fine of Rs 15 crore or 4% of the firm’s turnover in the case of a breach. 

A circular mandating all payment companies to store data of Indian customers within India has already been issued by RBI and is in effect. The companies affected were because of this norm were: Visa, Mastercard, Infosys, Paytm, Flipkart, Google, and many more.  

Current Status:

1.     A 2018 survey found that 52% of Indian companies with $100 Mn-$1 Bn revenue reported a data breach.

2.     India digital economy is worth $200 Billion with a strong reported growth 

3.     The recent report of NSO, an Israeli Surveillance firm being sued by WhatsApp for breaking into phones of roughly 1400 users across 4 continents, created a stir. 

4.     Assessing privacy and state of surveillance in 47 countries, UK-based Comparitech in a study this week placed India among the bottom five non-EU nations when it comes to protecting the privacy of its citizens. 

The report highlights such 

·      Its Data Protection Bill is yet to take effect and there isn’t a data protection authority in place, meaning privacy protections are weak at present

·      The Aadhaar Identification Scheme gives citizens a unique ID number and is also home to the largest biometric database, which contains 1.23 billion people

·      This database also contains information such as purchases, bank accounts, and insurance

·      Trying to get WhatsApp to make messages traceable by adding a digital fingerprint to every message sent

·      CCTV isn’t regulated, and any privacy laws relating to it are very vague and open to interpretation

·      10 government agencies have recently been given the authorization to decrypt, monitor, and intercept data on any computer (but this must be approved by the Home Secretary)

·      Should service providers fail to offer intercept capabilities, they could face prison for up to seven years

·      Looking to install hi-tech border surveillance at certain borders

·      Frequently shares information with the US and has multiple Mutual Legal Assistance Treaties with different countries

·      Ranks 140th in the world for the Press Freedom Index with 6 journalists (at least) being killed in 2018.”

(The highlights are the excerpt of the report which can be accessed here: https://www.comparitech.com/blog/vpn-privacy/surveillance-states/ )

Cons: 

1.     The EU, which was successful in passing and enforcing the world’s first data privacy law, the General Data Protection Regulation (GDPR), described India’s overall data localization requirements in the draft Personal Data Protection Bill as “unnecessary, harmful, and likely to have negative effects on trade and investments.”

2.     Using advances productivity measures such as firm-level and industry level, Total Factor Productivity & Labor productivity, ECIPE tried to calculate the impact of such stricter data policies on the sectors and industries reliant on data. If similar calculations are assumed for the Indian economy, the current draft Personal Data Protection Bill could cost India nearly $8.4 billion (60350 cr) annually. For the perspective, Reliance industries, annual profit clocks roughly at 35000 cr. The report can be found here: https://ecipe.org/blog/the-cost-of-data-protectionism/

3.     Increases the cost of operation by 30 percent, making overseas companies unhappy.

JioMoney and Paytm are more vocal about the same while US giants are crying foul. An interesting fact is that investors such as Berkshire Hathaway, SoftBank, and Alibaba have backed Paytm with significant funding. It would be interesting to follow the recent developments and their impact on Indian Landscape. 

References:

1.     https://inc42.com/datalab/heres-how-indias-data-localisation-norms-will-hurt-the-economy/

2.     https://www.comparitech.com/blog/vpn-privacy/surveillance-states/

3.     https://www.google.com/search?client=safari&rls=en&q=india+digital+economy+size&ie=UTF-8&oe=UTF-8

4. http://www.mondaq.com/india/x/860598/Data+Protection+Privacy/The+Right+To+Be+Forgotten+Under+The+Personal+Data+Protection+Bill+2018

5.     https://scroll.in/article/940863/after-russia-and-china-india-is-the-third-biggest-surveillance-state-in-the-world