Investor Relations is a hidden niche within the corporate finance world. It’s mainly filled with accounting and finance nerds but also requires the talent of marketing, public relations and sales. The simplest way to describe the office is a one-stop-shop where wall street (it mainly exist for institutional shareholders) goes to find out the latest financial and business information on the company. What’s surprising is even for the largest companies in the world, the IR team is typically a small team of 4 to 5 analysts at most, and often just 1 to 2 people in small companies.

It’s more than your typical accounting filings since there are no strict rules on how you can present your information other than consistency with your SEC filings (which is different than tax filings) and accessibility to all (so no information can be used for insider trading). So there’s a sense of artistry to how to tell a story that is accurate and at the same positive motivate people to buy more of your shares or be just being confident at being a shareholder.

Because of that flexibility on how one frame and tell the investment thesis for the company, you can get a little more flavor or color (as they like to say on the street) into how management thinks. You’ll get a better feel of what management values more (i.e. the more technical focus with lots of details on specs and numbers or more big picture with simple story and clear story) and especially how they really feel through the tone and words they use in live presentations. It’s the one place you can hear the CEO directly about the future of the company and answer questions from shareholders no matter who you are. I’m surprised more MBA school doesn’t teach some part about this in their finance courses.

However, not everyone plays the game the same way. For example Elon Musk’s reaction on the 2Q 2018 earnings call: https://autos.yahoo.com/elon-musk-defends-strange-conference-112600046.html

The most interesting part of the call to me is that Tesla allowed a retail shareholder to get on the live question queue. For those who don’t know the magic behind the scenes on how quarterly earnings call works: Everyone dials in on the same phone line, but on the operator side they are in constantly communicating with the IR team to.

The IR manager will dictates to the call operator who will be next one to go live. Typically only “sell-side” analyst will ask any questions because they are in the business of selling their research reports to investment managers, whereas “buy-side”, aka the real shareholders and investors, rarely go live because they don’t want to publicize what they are thinking. In all my years of experience sitting behind the scenes on company earnings calls I’ve only seen one time where a “buy-side” actually asked a question.

Most of the big “buy-sider” have plenty chance to ask their questions in 1×1 meetings, especially when you’re the big dog. Ok, maybe Elon Musk might not give as much face time as your typical Fortune 500 CEOs. But any large shareholder can get an answer directly, and probably more accurately, by talking to IR or CFO, so the question that gets asked on the live call is more often for show. Which is exactly what day traders use to trade on.

Another thing people need to realize is that the company executives interact with the sell-side analyst quite often and each analyst have their own history. It’s no different than the media business. If someone consistently only tell one story about you and ignore the others you will figure out their agenda pretty easily. Plus as big and powerful as wall street is, it’s also a very small world, so words get around and some people never forget. I don’t envy the IR manager in this instance because the wall street analyst that asked the question no doubt have the direct number to his office and I can’t imagine there won’t be a follow-up call since it’s a pretty close community.

Again, this is only something a founder/CEO can accomplish. In Tesla’s case, Musk doesn’t even have to own a majority to control the board, so he can definitely afford not to play ball. However, the market reaction after the call sort of played right to the short sellers favors, and if they know that this works then they might just keep doing it. The traditional adage is that if you show that you are being as transparent as possible, Mr. Market will reward you with a price premium for being a good player, and vice versa. But if your company’s mission is not to please Mr. Market but to move humanity forward, then it’s a different ball game altogether.

Musk didn’t start Tesla or SpaceX to make more money. He already had a buck or two before both of those. He risked it all to take on this seemingly impossible goal in order to advance all of humankind forward, and it was never a guarantee every step of the way. So it’s only natural that he expects the “true” fellow owners of the company would share the same sentiment. As long as Musk know he has the operating cash to keep the business afloat, the result will speak for itself.