KCSA PUBLIC RELATIONS, INVESTOR RELATIONS BLOG
Posted by Garth Russell on March 19th, 2015
If you’ve spent any time around the financial sector, you have likely heard of Elon Musk’s magical silver tongue and how he uses it to tie up the brightest minds on Wall Street, convincing them not to “look underneath the hood” into how he runs Tesla. Investors seemingly believe that the performance of Tesla’s revolutionary electric cars directly correlates to the Company’s ability to deliver favorable financial results.
That was, until this week, when something interesting happened on Tesla’s quarterly conference call that caught most listeners off guard. During this particular call, Mr. Musk seemed to have lost some of his usual pizzazz and instead sounded more like the fictional character Ellis Gage Hightower from Showtime’s House of Lies, complete with smug comments and exceedingly out of touch expectations. As a result, some of the Tesla naysayers—like CNBC’s Jim Cramer—pounced on Mr. Musk, effectively slamming the entire Company and its vision.
This left me asking, has Mr. Musk finally reached a point of success where he is no longer concerned about the opinions of analysts and investors? Or rather, was this another example of someone speaking off the cuff and hitting all the wrong notes?
As an IR professional that has represented public companies for more than a decade, I have experienced some of the best and some of the worst quarterly conference call performances. Through my work at KCSA Strategic Communications, I have supported 600+ earnings conference calls. As such, I can confidently state that none of the questions asked during Tesla’s quarterly call should have been difficult for its management team to answer. In fact, most of the questions should have been viewed as softballs—ready to hit out of the park. This brings me to a simple conclusion: Mr. Musk and the rest of the management team did not properly prepare for the call.
The takeaway for this missed opportunity is that management teams of any public company—large or small—need to take quarterly calls seriously. Four times each year, management (and this includes the CEO!) has both an opportunity and a responsibility to effectively report on the company’s results and future expectations. Therefore, it’s imperative for the entire management team to anticipate potential questions they might receive from analysts and investors; they must also ensure that the CEO has an appropriate level of insight to effectively respond.
At KCSA, each quarter we meet with our clients at least a month ahead of the call to perform a complete information dump. We then go through the process of deciding what is relevant to investors as well as what we are able to disclose given competitive or customer concerns, and then we begin to develop a storyline. We help our clients develop responses—delivered through the management team’s prepared remarks—to every question considered relevant. From there, we develop answers for any further in-depth questions that might be asked.
In my professional opinion, this is the best approach for handling these types of calls.
Conversely, Tesla runs its calls a little differently, in that they do not deliver prepared comments; rather, they head right into a Q&A session. In place of comments, Tesla simply issues a press release ahead of the call that serves to frame the events which drove the quarter. While this less-than-traditional approach provides more time for analysts’ questions, it also robs management of the opportunity to frame different topics in a scripted setting.
Truth be told, this isn’t the first time that a CEO, propped up by Wall Street as the ringmaster of his company, has underprepared for an earnings call and ended up giving his critics ammunition. Not too long ago, Mark Zuckerberg was slammed by just about everyone shortly after Facebook’s earnings call during which he provided a less-than-stellar vision for the plan to monetize the Company’s user base. He quickly rebounded, however, and not only provided a clear mobile advertising strategy on the quarterly calls since, but also started to deliver results.
In the end, this will hopefully be a minor glitch for both Mr. Musk and for Tesla. I believe Tesla has enough horsepower to move past this call to win back some of his fans and shut down his critics.