Will short-termism eat Tesla?

Elon Musk announced this week the mass production sale of their Standard Model 3 - the people's electric car. At least in the US, consumers will be able to buy a sub $35,000 electric vehicle with sportscar performance, piston-car range, and looks and technology to kill; all this before any State or Federal incentives. The result: Investors couldn't be grumpier about it.

Tesla's stock has long been short-sold, and Musk's arguments with short-sellers have become somewhat of a running soap opera. Well-known figures like Mark Spiegel and David Einhorn have taken significant short-sell positions (the latter having made losses from previously taking short positions on Netflix and Amazon, by the way).

We have short sellers in the market, and whilst vocal, it's not actually them I want to focus on. I'm also not commenting on Elon Musk's twitter use and the impact on markets. What I want to focus on are the investors who actually place their capital in Tesla today.

The announcement of the standard Model 3 was followed by a profit warning in Q1, and that there will be savings from reducing costs on front-line sales - the Standard 3 being an online-only offering. The market responded with a share price slip at the close that day, settling from earlier week rises. Criticism from investors included that they should focus on the premium market, increase the base model price, and more. All that might seem fair, but the problem is that Musk is following through on his promises - to produce a mass-market car, at low cost, with a premium-feel, and to drive the revolution to a zero carbon economy.

We know from EY research that 97% of global investors are now assessing non-financial performance, and that we need new and better ways for investors to understand how value is created for the long-term. Indeed, investors tell us they need more disclosure from companies on just how companies will manage climate risk. The anticipated annual letters from influential billionaires like Bill Gates and Larry Fink tell us that "if we’re going to solve climate change, we need to get to near-zero emissions on all the things that drive it"; and that as "we enter 2019, commitment to a long-term approach is more important than ever – the global landscape is increasingly fragile and, as a result, susceptible to short-term behavior by corporations and governments alike". So why, then, are investors not happy with Musk? His overarching mission is to 'accelerate the world's transition to sustainable energy'. He set out a clear path - niche bespoke offering of vehicles which challenged our thinking on what electric vehicles can do - faster sportcars, more spacious people carriers, more technologically-advanced luxury sedans; but all that was to pave the way for the people's car. The transformation. The mission.

Does this all mean that public markets can't be relied upon to support growth plus? The economic growth needed that doesn't prejudice future generations? Will we need governments and private wealth? I don't think so - but we certainly need to see businesses setting out a strategy that attracts investors; and not investors dictating a business' direction that suits their short-term desires for returns.

So what can we do? Clearly, improving communication from companies on how they create value over the longer-term. This will be especially important where there are opportunities for near-term actions to creating profit - which might seem attractive to stakeholders - but actually isn't best for the long-term growth of the company.

What did I do? I put down a deposit on a Model 3.