CEO Elon Musk acknowledged the email leak -- which is happening with regularity, so take that for what it's worth -- with a response of his own. He released his email to the public via Twitter Inc. (TWTR - Get Report) , explaining why the company was letting go of almost 10% of its workers.
With some 46,000 employees, Tesla is no small employer despite being a relatively small automaker in terms of output.
However, Musk was careful to frame his words regarding this "difficult yet necessary" move. "These cuts were almost entirely made from our salaried population and no production associates were included, so this will not affect our ability to reach Model 3 production targets in the coming months," he said.
It also seems as if this email was written with the intent of being public, or at the very least, knowledge that it likely would become public. In any regard, Musk told bulls and bears alike exactly what they needed to hear. Inevitably the first question in many investors' minds would be: How does this impact production?
With Musk seemingly clearing the air, there's not much to question. For all we know, Tesla is still well on its way to hitting its goal of producing 5,000 Model 3 units per week in the next three weeks or so. Our previous update came earlier this month at the annual shareholder meeting, where Musk said it was "quite likely" Tesla would hit the mark.
It didn't take long for the short-sellers to react to the email, jumping in with comments akin to, "if Tesla is growing so fast, why is it firing so much of its staff?"
That reaction isn't a complete surprise, but it's worth pointing out that this move shouldn't have caught too many people off-guard. When Tesla reported earnings in early May, management told investors that it would be going through a reorganization.
At almost 50,000 workers, it makes sense why Tesla is doing so now. Musk & Co. are also keeping with their previous outlook that the automaker will be profitable in the third and fourth quarter of this year. GAAP profitable that is, and cash flow positive as well. To do so, the company needs to save where it can and, as much as the bears don't like to hear it, Tesla has been growing fast even if it has been burning a hole in its pocket.
Musk acknowledged as much in his email, saying, "given that Tesla has never made an annual profit in the almost 15 years since we have existed, profit is obviously not what motivates us."
Well, there's something the bears can agree with. In any regard, Musk has previously said he's working on improving his tendency to over-promise and under-deliver. With that, it seems like he's doing whatever it takes -- including firing staff and simplifying Tesla's management structure -- in order to deliver on its current promises. In that case, it's to be building 5,000 Model 3 units per week and be profitable in the second half of fiscal 2018.
Tuesday's moves are another step in the right direction, in my view, even if the shorts view it as a negative development.
There are certainly reasons to be bearish on Tesla and the short side makes a formidable case. But a level-headed investor will acknowledge all news: good, bad and neutral. Seeing every bit of news or action through bias-tinted glasses isn't a good idea, for both bulls and bears. For instance, being overly bearish likely kept some shorts from realizing just how close Tesla stock was to a short squeeze.
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