Tesla Q1 deliveries; The Extraordinarily Misguided Attack on TikTok; Barry Sternlicht Issues Statement Announcing Resignation from Cano Health Board of Directors; 22-hour trip to Poland; How to Bid on a First-Class Seat
1) Yesterday Tesla (TSLA) released its vehicle production and delivery figures for the first quarter:
While deliveries slightly exceeded estimates, one friend of mine wasn't impressed:
422,800 cars sold, up 4.4% from 405,000 last quarter, thanks to cutting prices somewhere in the neighborhood of 17%.
A 17% price cut wipes out well over 50% of any net profit, perhaps close to 100%.
The move was done in desperation, following a reduction in demand at the prices as they existed for most of Q4:
- A weaker consumer in North America and Europe; perhaps China too, who knows?
- An onslaught of new competition in all geographies. I'm in Europe, where 14 new Chinese electric vehicle ("EV") brands are entering the market between late 2022 and the end of 2023. None of them are yet in the U.S., but they will make it hard on every incumbent automaker, including Tesla. The streets of big cities here are being flooded by MG, BYD, and NIO EVs.
My prediction: analysts will reduce their 2023 EPS estimates for Tesla. Usually, that means a falling stock price – duh! – but this is Tesla so up is down and down is up, so we don't really know how it will play out in the short run.
Remember, over the last three months, Tesla's 2023 EPS estimate has gone from $5.32 to $3.98 – a 25% decline – yet the stock just about doubled...
I continue to believe that Tesla is neither a good long nor a good short.
2) I've long called for the U.S. to ban TikTok... But I always like to consider points of view that differ from mine, so I was glad to see my friend Zachary Karabell make the case.
I'm not persuaded, as I think the likelihood is high that someday China will use the app to meddle in our society, but it's worth hearing him out: The Extraordinarily Misguided Attack on TikTok. Excerpt:
In general, it's a positive when parties and officials across the political spectrum find common ground and work together to solve collective problems. In the case of TikTok, however, the rising chorus to ban the app and prevent or dramatically curtail access for American citizens is a profound mistake – not because TikTok per se matters greatly one way or the other, but because banning it violates the core strength of American society: its openness...
The United States will never be able to compete with China in censoring information, nor should it. But it could undermine its own vitality as an open society if it heads down the path of trying to ban apps in the name of national security.
The wave of blacklists and McCarthy era crackdowns on Americans who professed Communist and even socialist beliefs and sympathies did not make the United States more secure in the early days of the Cold War; it made the country more paranoid and brittle, undermined creativity and the free flow of scientific information and briefly threatened to undermine the stability of the very government agencies such as the State Department and the Defense Department that were tasked with preserving national security.
America does not do suppression of free speech particularly well, which is a good thing. And we should not optimize for a future where we do it better by making a new go at censorship. For the United States, the risks of TikTok are far outweighed by the risks of banning TikTok...
China may represent a 21st century challenge to the United States and to a certain free world order. Meeting the challenge will require doubling down on the strengths of an open society. Banning TikTok is an act of weakness that will do nothing to make America more secure, and will in fact make it less so.
3) Boy, you don't see board resignation letters like this very often: Barry Sternlicht Issues Statement Announcing Resignation from Cano Health Board of Directors. Excerpt:
Unfortunately, I can no longer lend my name and reputation to the Company, nor support actions of the Board and Marlow Hernandez, which I believe are not in the best interest of stockholders.
I have communicated my concerns to the Board and to Marlow Hernandez directly on numerous occasions, but they have largely been ignored. To be crystal clear, I do not believe Marlow should remain the Chairman & CEO of the Company. I believe that his continued tenure is harmful to the interests of stockholders and to Cano employees for all the reasons I have previously stated to you.
I remain extremely troubled by the poor operating decisions and performance, by what I consider the opacity and obfuscation of information furnished to the Board, and by the inability to forecast the Company's financial performance over which Marlow and his management team have presided.
These factors have caused the Company's stock price to be decimated, dropping over 90% from its debut, and the Company is now saddled with a crippling debt burden. The number and nature of related party transactions, together with what I consider poor governance (demonstrated by transactions such as MSP Recovery), is highly concerning to me as it should be to the rest of the Board.
Instead of the Board calling the CEO to account, the majority of the Board has decided to continue to support the CEO and to continue to preside over the destruction of shareholder value.
Over the past year and a half, some shareholders have called me to voice their concern over Marlow's stewardship and the Company's financial deterioration. I listened and conveyed their thoughts, which included these negative perceptions of our CEO, to the Board. The minority of the Board – myself, Lew Gold and Elliot Cooperstone – have tried to effectuate change, but as a minority our hands are limited by those who remain firmly aligned with Marlow for reasons I cannot understand.
I have never witnessed such poor corporate governance at any company, let alone a public company, and I have been involved in at least nine and served as Chairman or CEO of six.
4) As you read this, I'm on my way home from my quickest trip ever – to Poland to bring $300,000 worth of supplies to Ukraine (thanks to my many generous friends and readers).
Some items like hospital gowns and sheets can be sent via ship, but that takes two to three months. For more valuable and/or urgently needed items, someone needs to fly them over – so off I went yesterday evening!
I checked 11 70-pound bags – here's a picture of them in our apartment, ready to go:
When I arrived this morning, I picked them up at baggage claim and went through customs, where I've heard stories of Polish officials causing problems (not bribery, just bureaucracy), but nobody has ever asked me any questions in my three trips in the past two months (I suspect it helps to be an innocent-looking, middle-aged guy).
Once through customs, I gave my bags to a guy who works for a friend of mine who then takes everything into Ukraine and distributes the supplies within a few days (speed is of the essence).
I then turned around, walked through security, and boarded the same plane back to New York – nine hours over, three on the ground, and 10 hours back, so in total I was away for only 22 hours!
Here's a picture of my plane getting de-iced before we took off from Rzeszów. There has been record snowfall across the region, which has helped Ukrainian forces (see:
Biggest snowfall in a decade makes Bakhmut fighting 'impossible').
Note all the cargo planes in the background. This is the closest airport to Ukraine and the main hub for the U.S. military...
To learn more about my Ukraine mission (which you can support here), see my March 15 (Why I think the Ukrainian tiger is about to devour the Russian bear – and the implications for stocks) and March 17 (What's REALLY happening in Ukraine) e-mails.
5) On all three of my recent flights to Poland on LOT Polish Airlines, I was able to upgrade to flat-bed business class relatively inexpensively by bidding $700 to $750. For comparison, the price for my round-trip ticket was $1,613 in economy and $6,403 in business class.
So by bidding in advance (or, in one case, inquiring about a paid upgrade when I checked in – it was $750), I was able to fly for half price.
For a flight where I want to sleep, my rule of thumb is that I like to pay less than $100 per hour of flight time, so that's a good deal in my book.
Many Americans may have never encountered an airline accepting bids for an upgrade, but I've found it to be quite common among second-tier international carriers that don't have big frequent flyer programs like LOT, Kenya Airways, and Air China.
Here's a New York Times article with tips: Going Once, Going Twice: How to Bid on a First-Class Seat. Excerpt:
The why-nots among economy fliers are now generating what analysts believe may be millions of dollars for participating airlines that offer automated auctions for premium class seats on planes. The practice – growing among foreign carriers with scant pickup domestically – offers economy fliers the chance to upgrade at a discounted rate and improve what could be a cramped and sleepless long-haul flight...
"Airlines are trying to convert leisure customers to high-end leisure customers," said Kevin Stamler, the founder and chief executive of SeatBoost, an auction service that currently works with three airlines, and has plans to start working with seven more this year. "It's the cheapest way to upgrade."
On two separate flights on foreign carriers last year, I was offered upgrade opportunities and made both winning and losing bids, which inspired me to look more closely at the practice. The following is what I learned, and explains why you might find upgrade auctions on your next flight, train ride or cruise.
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.