Elon Musk Call Was Reminiscent Of The 2001 Enron Call: Johnson

burns a lot of cash. Here to tell us more about the company is Gordon Johnson, Managing Director, Alternative Energy, Metals, Mining and Equipment Analyst for Vertical Group. Gordon Johnson, always a pleasure. You were listening into the call yesterday. Why don't you share with our listeners what you heard and what you took away from it? Yeah, I mean, so what we heard on the call um UM, Surprisingly, I think not just to us, but many was a very

defensive um management team from Tesla, specifically Elon Musk. And you know, historically they've been very open to taking questions, and it seems like very important questions with respect to surprisingly low April Model three deliveries. UM, what's going on with the deposits on the Model three given U the cars have been delayed significantly. UM. Questions around these items were essentially deemed boring UM, and they turned it over to a YouTube blogger UM who says he owns fifty

four shares UM. So when you're shutting UH analysts from the institutions that you are heavily relying on and heavily rely on to do your business, it's it's very concerning. You know, it's reminiscent to us of you know, in the second quarter of two thousand one when Jeff skilling Um called an analyst on our areas call Um, when the stock was at fifty five and by the end

of the year was at nine. Not we're not saying Tesla is in ron, but we are saying that this is a definite shift in tone from from management at at Tesla. So Gordon, given given that shift, why aren't the shares of Tesla down more? They're down more than six, yes, but still somewhat elevated. If you really think that that this is about to collapse, yeah, I mean it's because you have literally this is this is not a you know, an analysis type of stock or fundamentals based stock. It's

literally a faith based stock. It's almost a religion um. And I think that a lot of the holders know. If you look at the proxy statement of Tesla, you'll see that Elon Musk is predds thirteen million shares of stock for different debts that the company has. So we don't know exactly what the key levers are to call that. You know the essentially when that stock will be called. But you know if this stock drops to a certain level,

it's going to accelerate down. As you know, the death holders um essentially forced Elon Musk to sell stock to to cover those debts. Okay, so let's talk about the death holders and the capital raise that Elon Musk says that he doesn't need to do. He said that they're going to stop burning cash later this year and start turning a profit. Um. How much credibility is there at this point with those pledges And is it true that you think that he won't need to raise capital again

in the next time? I don't know nine months. Let's raise the facts, right, they burnt over a billion dollars of free cash. The cash balance dropped by nearly a billion dollars in a quarter. This is the third largest cash burn free cash flow cash burn in any single quarter. I want to be clear here, Elon Musk is saying that he is not and will not raise equity. He has said that before you go back to fifteen, he said the company will never need to raise equity again.

Since then, I think they've done in six to seven times. We think they will need to raise and let me be more specific, we think they're gonna do it this quarter, which means over the next two months. Is it gonna be equity? I'm sorry, we think they need to raise capital. Is it gonna be equity? Is gonna be dead? We don't know, but we do think they need to raise capital if they're going to hit their uh, you know, production plans um And that's where we stand, and that's

what our analysis suggests, and we stand by that. This quarter affirms that not not not not pushing us further away from that. Gordon, what are some of the specific issues that the Tesla has to deal with in order to let's say, get this model three out the door and onto onto the road. Yeah, so if you look at the electric which is very well respected, they're saying

the giga factor is only complete UM. If you look at some of the care downs that respected UM auto analysts have done, and these these on sell side analysts, you know, financialists, these are these are engineers. Uh. They said that the Model three has been built very um UH. I don't want to use their word poorly, but certain

items and certain key steps have and skipped. So think about this, Kim, right you have Tessa said that you hate Model three Model threes that have been produced in the first half of April UM and they said there were two thousand Model threes in transit, so that's roughly six thousand Model threes. Yet inside EVS is saying they only delivered fifty. So and then if you use the Brewer numbers the which they tracked the VIN numbers for the Model threes, there was ten thousand produced in April.

So it looks like there's thousands of Model threes sitting out there that either are in transit to be the Lute, which it doesn't take long to deliver these cars, that's one option, or you know they have issues. I either have been poorly constructed and they're still waiting to be finalized so they're not really produced UM, or they're just sitting in inventory. Um either three of those scenarios is scary. So to your question, what needs to be done, Uh, it seems like quite a bit needs to be done.

And we need to get more color on these production numbers that they're pitting out there, because the deliveries numbers from inside EVS And keep in mind this this is a third party um U analytical company, but you know, very well respected, a very spot on so far over the years with the sector Tesla deliveries on a monthly basis. Uh, they don't match up with Tesla's production numbers. So what do they need to do? Probably spend a lot more CAPEX to get their production facilities up to snuff UM

And that's clearly not what the company is indicating. They actually cut their cap X numbers. Well if they don't have the capital to expand. Gordon Johnson, thank you so much for joining us today. Gordon Johnson is Managing director, Alternative Energy, Metals, Mining and Equipment Analyst at Vertical Group

in New York. Uh some strong words that the call yesterday that Ellen Musk held with investors reminded him after the two thousand and one n RON call, and that Tesla would have to raise capital within the next few months in order to keep going. We will keep an eye on the shares which are down about six and a half percent right now. Bermuda is an economy that depends heavily on tourism from the United States as well as its desk as it's a it's a well known

profile of being a destination for businesses. Here to talk about the nation is the Honorable David Burt, Premier of the Government of Bermuda. He is the youngest ever he joins us now he is thirty eight years old. You went to George Washington University UH and graduated with a business degree, and so I want to talk with you. You've been in the position for about nine months now. SMP just upgraded UH. The outlook to for Bermuda to UH positive outlook. What do you see as the main

challenge going forward in the near term for Bermuda. Oh, well, good morning, it's Elie saying good morning. It's him a good morning to your listening audience. I mean, the challenge for Uda is to translate what we've done well for so long into a new future and what that world

will look like. So Bermuda has always been a center of innovation and the reason for our success in the insurance spaces that we were able to bring together regulators, the lawmakers and the business sector to figure out regulation that was smart and that could work and that could allow industries to grow. And so from that perspective, our challenges to translate that into new areas of the economy

and our the global economy. So whether or not that's dealing um in the space of digital assets, or whether that's dealing in the space of how we're going to look to play a role in what the global economy will be, that's what Bermuda and that's how Bermuda is trying to position itself. Speak if you can about the actual structure of Bermuda. It is a British overseas territories. What does that mean in terms of its governance, its

laws and its relationship with the United Kingdom. Bermuda as a over these territory, we have the most advanced constitution out of all the United Kingdom overseas territories and it's a constitution of which we're actually celebrating our fiftieth and adversary ever, thank you very much this year, actually this month uh to be precise. But what our relation is

that we have full internal self government. So we make all of our own laws and we set all of our own procedures, and the United Kingdom is responsible for internal security, UM, external affairs and defense. Okay, I'm wondering you're talking about how insurance companies and other businesses have gravitated to the territory. I want to talk about a new UK law that will go into effect I believe in twenty twenty that will force UH different companies to

disclose where they file their taxes. That might butchering this, but basically people are concerned that this will give less of a benefit to certain corporations who file in Bermuda. What's your take on this and can you please, you know, give it more detailed. How I'm then what I just tried to do, No problem, I'll be I'll be happy to do that. Let me start by saying that uh in from the Bermuda perspective, we make our own laws.

And so for the first time in the fifty years that we've seen an internal squabble which is taking place the United Kingdom get to a point where there was an amendment that was passed to a bill where the parliament seems to think that it can pass laws for people that don't have representation inside their parliament. So that is a completely separate issue and that's something that UM

I think UM is unfortunate. But in from the Bermuda perspective, we do not recognize the right of the United Kingdoms who set um our laws because we have full internal self government and the only thing the United Kingdom actually has responsibility for his external affairs internal security and defense. However, because I don't want to conflate the issues, what they had spoken about was an issue of having a public register of beneficial owners of companies, which is not the

global standard of which exists. Bermuda has, unlike many countries, for over seventy years, had a central register of beneficial ownership, so we know all the persons who owned the companies that are registered in Bermuda. And what we also have is that we are we are compliant with the international standards which is set by the o E c D of making sure that we exchange that information UM with authorities UM around the world who are looking to get that.

So Bermuda has has led the charge. We are one of the leaders UM in international tax transparency and compliant. So we are the first overseas territory to have an agreement with Her Majesty's Revenue Customs in the UK and the first overseas territory to have an agreement with the U s UM Internal Revenue Service here UM in uh IN in the United States. So we UM have led the space in this charge. But Bermuda is not a

tax play. Bermuda is a regulatory play as well, and so what you see for the insurance companies, A lot of the insurance companies that are actually in Bermuda UM have taken a eight to get too technical, a nine

fifty three election on their UM tax return. So they actually file taxes as a US taxpayer, but they're in Bermuda because we have a unique regulatory environment that allows us too, that allows them to deal with one regulator to access insurance markets the United States as opposed to the fifty different regulators that are in all of these states here in the US. I wish we had more time because the one question I want to ask you has to do with same sex marriage. I don't like,

can you do that in twenty seconds? What's the status UM I'm perfectly happy to discuss that. Bermuda. We uh, we are the first UK Overseas Caribbean UK overseas territory to give full legal recognition to same sex couples. It is something that did not exist in Bermuda before our government passed it and we are welcoming to all persons on our shores. We are proud of the records which we have. Uh. If you want to say five years ago there was nothing, but now we recognize um all

same sex couples. Thank you very much for being with us. The Premier Bermuda, David Burt, thank you very much. And the happy birthday and congratulations on the constitution anniversary. Absolutely, thank you Bermuda, much appreciated. Amazon just has to hint that it is thinking of getting into an industry to scare shareholders away from all potential competitors in that sector.

Here to talk about the skirmish that happened yesterday in the payments sector is David Ritter, Payments and specialty finance analyst with Bloomberg Intelligence. Dave, thank you so much for being with us. Bloomberg News reported that Amazon said that it was more aggressively getting into payments processing to compete with the likes of PayPal, Visa, MasterCard, Square. There was a fierce reaction tell us, what is Amazon exactly thinking

of doing? Well, it's interesting. I mean, this is a topic that I've written about, actually going back many months, the possibility that uh, they might decide to sharply cut their rates to and sent merchants to accept their Amazon Pay service. So, I mean, just think about it. Between what are the two hundred million Prime users now, so that's two hundred million stored payment credentials plus non Prime

users have their payment credentials stored there. But the challenge has been you know, Amazon has been trying to crack this market for many years, and the difficulty that they have is number one. Obviously, they sell merchandise themselves, so they're competing against merchants. And you know, ever since paypals split away from eBay, uh, their growth has accelerated because that concern that merchants had by doing business with PayPal has gone away. So, I mean, I think the reaction

is overdone. I mean, I feel PayPal has been beating back all competitors and its growth has been accelerating in recent years. Of anything David, can you explain this sort of the finances behind doing this. Let's say that someone listening is a producer of a product and they wish to sell it through Amazon. How much does it cost

for Amazon to take care of the transaction? Yeah? Amazon, you know, they don't publish their specific cost, but you can assume just like any other very large merchant like Walmart or Target for example, they are getting favorable rates from the credit card processors to process credit and debit card transactions on their site. So they do have that advantage. Um. But right now, the way it works is, you know they're going to charge a merchant, say three rate to

process and transaction, just like PayPal does. But then you know they have to turn around. They're they're basically acting as the merchant in that case, so they have to turn around and pay the cost back through the payment card network to take that transaction. So um, so they're not making a full margin on it. And that's where PayPal differs in one key respect is that a lot of folks keep a balance in their PayPal account, so you use that balance to pay, or you use your

link to checking account to pay. There's little or no cost in that transaction to PayPal and they're making that full margin from the merchant rate that they're charging. Okay, well that goes that dovetails perfectly into another Amazon initiative people have talked about, speculated frankly, that Amazon will try to get into the customer deposits business, perhaps to compete more directly with the PayPal on this matter. Do you

think that they can make inroads into that effect? Yeah, I mean, what's really surprising is how important trust is in this business. Um PayPal consistently ranks right up there with major banks in terms of trust in holding their money and handling their money, which is not something you necessarily think would be the case. But when you've been at it, you know, for twenty years like they have. It sounds silly to say that's an old company, but in the tech world it is. Um you know, they

they had that built in advantage. I'm not sure that Amazon people think of it the same way they think of as a neat place to buy stuff. And you know, Amazon's pretty successfully provided a lot of financial services very well through third parties. You know, they have a card with Synchrony and they have a card with Chase that pays a big five percent rebate. That's real popular. Um, you know, I'm not I'm not sure. And there's plenty

of ways to add cash into your Amazon account. You know, you just go, you just go buy a prepaid card and moad that money in. And um, you know they have for a debit rewards program now too, So I kind of feel like they're already doing a lot of these things, Dave. What's been the response of Visa and MasterCard?

They gonna go the PayPal route? Uh? In terms of well, you know, Visa and master Card have their own, um call them alternative pay buttons that they've been trying to push in recent years, and none of them have really gotten any traction. And you can also throw Apple pay and Samsung Paying, these other alternatives into the mix. Um, at least in the US, they really struggled to gain gain traction. Whereas you know, PayPal's got coming up on

twenty million global merchants that excepted as payment. It's really pretty astounding. Amazon, of course, has a hundred million Prime members though, And I want to just home in quickly on the trust issue. Are you implying that consumers don't trust Amazon? No, I'm not employing. They don't trust Amazon,

but it's it's one thing. If you're looking to expand further into financial services and holding people's money, I think you're crossing into a little bit different area than Look, I know I'm paying for something and I'm using my my credit card, but that credit card it is from Chase and they're the ones providing the the actual relationship behind that. All right, we want to leave it there,

but thanks very much for sharing this information. But it's very interesting and Lisa, as you describe it, the Amazon effect, all they have to do is sort of mention that they're going to be getting into some particular industry. In

the stocks of the competitors all react. Yeah. Although it's interesting because when I listened to Dave ritt Or, it really I realized that perhaps this offers up some opportunities to people who are still bullish on specific companies if they think that the if the effect is overdone right indeed, and taking a look at the shares of PayPal, for example, they are down about one percent right now after falling

up more than four percent and yesterday's trading. Thanks very much to Dave Ritter, our senior analysts for payments, financial Technology and specialty finance or Bloomberg Intelligence. The world of advertising changes as technology and consumers change their taste, but some things don't change, and that's the emphasis on creativity. John Cyford is the worldwide chairman and the chief executive

of Ogilvie and Mather. He joins US now Ogilvie and Mather one of the many companies under the overall corporate banner of w PP Group. John, thank you very much for coming into the studio. Much appreciated. Could you just give people a little sort of maybe a thirty second history of Ogilvie and Mather because they may not recall that they came up with the Dove soap commercial that was kind of that was one of the hallmarks of your agency. But the history goes back to eighteen fifty. Yeah,

it's a it's an amazing history. Um. I remember it really in the context of that's when David Ogilvie started Ogilvie and May there in New York. We'll celebrate our seventieth anniversary this coming September, and uh, you know, I'm the ninth chairman and CEO of the company. I'll be the last one to have been mentored by all the previous eight, including David. So it's a founder brand that

I have huge passion and heart for. In terms of background, we've David had a list of the clients that he wanted to work for, and uh, he pretty much ticked off everybody on that list. He wanted to work for the Campbell soup company, he wanted to work for Lever Brothers. Dove has been a valued client of ours for right from the beginning. American Expressican Express, which is a client

that I've worked with for the last thirty years. You know, David was told that American Express was too small by his president at the time, and David ignored that advice and said, no, I think they're I think these people will do something special, and they certainly did. So. There's been a lot of changes just in the way that people absorbed media in the past two decades. I'm wondering, Uh, just in the past few years, what do you view as the biggest changed for you in your business as

far as just reading the message of a brand. Well, we call this the era era of great fragmentation. There have been never been more ways to reach people than ever before. Obviously, the digital revolution has ushered in all sorts of new way ways to engage consumers, and one of the paradoxes of all that choice is that many of our clients are are less confident in what works.

And so we're in an era right now where there's lots of experimentation, lots of new ways to build brands through digital engagement, through new new media sources, through personalization, through the big data, and how that can be applied to customizing products just to the particular need of a given customer. But at the same time, many clients are saying, what's how does it all work together? How much should I pay for it? And what's the real value that I'm going to get at the end of the day.

And so it's never been more complicated to help clients navigate this this new era. In navigating this new era, you must also recognize that what appears on the Internet is in no way verifiable anymore. I mean, we we have entered the age in which we really do not know what is behind much of the information and the advertising that we see. We don't know who pays for it, we don't know why we see it. All of these things. Do you then have to reinvigorate the what we believe

and how we behave ethos of Ogilvy. In fact, I think it's that is the only antidote we have for what some might call this lack of transparency in terms of of of how things show up. You have to believe from where they come. So brand ownership and brand trust never been more vital. And look at the social platforms now right. You know, these are companies that were deemed the companies of the future, the ones that we could all believe in, because they were ushering in this

new level of engagement and openness. And yet it's never been harder to kind of be confident that what they represent you can count on, you can believe in. And so it's it isn't It is an aspect of the paradox we live in. So as you speak, I just keep hearing Facebook, Facebook, Facebook, over and over again in my head. I'm just wondering, have you seen any shift in your clients away from Facebook in the wake of

the Cambridge Analytica issues. So one of my clients told me that they were at the University of Alabama and they asked a graduating class. So in a light of all of these issues with Facebook, are you you know, are you coming off Facebook and not using it? Not a single hand went up. And so I think one of the things that we're going to face is it is this fundamentally going to change consumer behavior? And and

I think the jury is still out on that. I mean, right now, these platforms are so ingrained in people's lives that even if flawed, it's hard to give them up. So I think we're gonna we're gonna see a much greater emphasis on verify, verifying and and being a accountable for both the content and the advertising of their peers in these platforms before we see massive exodus of of consumers. Do you believe that we're going to see a simplification

in the advertising business. I think if we don't, we're going to have real problems. Uh, the word it is far too complicated. And and I think one of the things that you're going to find, whether you're talking at a holding company level or in the marketing departments of clients and so on, is that we have to simplify the way we work together. You know, we just can't keep fragmenting and assuming that this is all going to

naturally come together. Uh, it takes real leadership. If you're in a client organization today and you're trying to manage a brand, and in some cases these clients are managing hundreds of brands. Um, you have to have a simplified way of coming together, bringing the right expertise, the right information, and ultimately the right accountability for the investment that you make. And if we're not part of solving that problem, I think we will we will suffer the consequences. I hear

consolidation in that. Perhaps we've got lots more to talk about. Unfortunately we'll have to leave it until next time. John Seifert, thank you so much for joining us. He has worldwide chairman and chief executive of Ogilvie and Mather, which is based in New York. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm

on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio