Musk also hinted that SpaceX may be a long time away from an IPO. Yesterday, Tesla CEO Musk had a 100-minute conversation with the well-known Wall Street investor "Mr. Mu". The following is the essence of the views compiled for you by Wall Street Insights.


Musk doesn’t like index funds

December 18 is the “three-year anniversary” of Tesla’s inclusion in the S&P 500 Index. Talking about this topic, both Musk and Sister Mu believed that the timing of Tesla's inclusion in the S&P 500 index was poor, which caused index investors to miss the stage of Tesla's stock price soaring wildly, which was "somewhat strange."

Musk also said that passive investment vehicles like index funds have become too big and they amplify the rise and fall of stock prices. The growth of index investing is not something that can be managed or fixed, but investors should be aware that today's stock market is different than it was in the past when assets were primarily actively managed. Musk added:

"At the end of the day, someone actually has to make the active decision. Passive investors rely on the decisions of active investors."

On December 18, 2020, Tesla’s stock price closed at around $232, and the company subsequently joined the S&P 500 Index. The company's stock price is currently around $253, up just 8.8%. Before being included in the S&P 500 index, Tesla's stock price rose by nearly 80%.

During the same period, driven by large technology stocks such as Microsoft, Apple, and NVIDIA, the S&P 500 Index rose by approximately 27% during the same period. In the S&P 500 Index, Tesla ranks seventh in terms of weight, and its stock price performance belongs to the second half of the S&P 500 Index constituent stocks during the same period.


SpaceX may be a long time away from IPO

Although the market generally expects that SpaceX may move toward an IPO, Musk's views revealed in the conversation seemed to indicate otherwise.

The conversation shifted from the pros and cons of indexation to a discussion of the benefits of public/unlisted companies. Sister Mu said that the public market may now be too focused on the company's cash flow. Musk said that capital-intensive companies like Tesla can obtain more capital by going public than by not going public. Musk added:

"I don't think it's worth going public unless you have an extremely stable and predictable revenue stream."

This means that investors who want to invest in SpaceX may need to be more patient, because although SpaceX has a series of promising technologies such as Starlink, its revenue may not be "extremely stable and predictable" enough.

Musk is confident in Tesla's self-driving technology

As for Tesla, Sister Mu and Musk focused on Tesla’s autonomous driving technology. Musk is confident in Tesla's self-driving technology, which he sees as a huge opportunity for the company.

As for the regulatory challenges facing him, Musk still affirms the attitude of the National Highway Traffic Safety Administration and believes that once the technology matures, supervision will not be a problem:

"I think from a regulatory perspective, when the technology is ready, everything will be fine."

other

At the beginning of the conversation, Musk and Mu Mu talked a lot about X (former Twitter) which has been privatized. Although X has been taken private, it remains important to Tesla investors. For example, X's losses may lead Musk to reduce his holdings of Tesla stock.

However, Sister Mu’s ARKInvest is not selling Tesla shares. On Wednesday, Sister Mu’s two funds also bought about 111,000 shares of Tesla stock. Sister Mumu is optimistic about Tesla in the long term. Tesla is ARKK’s second largest holding, and the fund’s largest holding is Coinbase.

Although Tesla's stock price fell slightly at noon on Friday, its year-to-date increase has still reached 133.62%, which is an eye-catching performance.