Musk Meltdown Underscores Art of Keeping Earnings Calls DullBy
Analysts risk being cut off by the companies they cover
Tesla chief sent shudder through world of investor relations
There are few things in life as reliably stultifying as the corporate earnings call.
From the tedious disclaimers at the outset about “forward-looking statements,” to the desiccated remarks read by leaden financial officers, to the mealy mouthed questions posed by unctuous analysts, the calls tend to emit a tonal range so monotonous that you can listen to hundreds of the proceedings without hearing a single memorable thing. They are the Muzak of the business world.
The banality is, of course, by design. Big companies no more want their executives to cause a stir on an earnings call than NFL owners want their rookie draft picks to make news during their introductory press conferences. The goal is to project confidence and otherwise be forgettable. Elon Musk’s recent unruly performance during Tesla’s earnings call -- where he bizarrely chastised analysts, telling them among things that “boring, bonehead questions are not cool” -- was a reminder of just how seldomly these rituals of corporate pageantry go off the rails.
The wave of unflattering media coverage that followed sent a collective shudder through the world of investor relations.
“You never want to see your management representatives fly off the handle with investors,” said Christopher King, vice president of investor relations at Windstream Holdings Inc., which provides telecom services in rural areas. “There’s no real upside.”
While there’s not much that corporate stage managers can do about an impulsive executive suddenly going off script, they can try to control the factors that might touch-off such a thin-skinned reaction. They can, in short, attempt to manipulate the questions.
“There are definitely management teams that would prefer that analysts are just cheerleaders,” said David Amsellem, an analyst at Piper Jaffray & Co. “They just don’t seem to respect the independence of analysts.”
To try and keep them in line, companies can reward chummy analysts with exceptional access to its top executives and punish critical ones by cutting them off. No purring about the company’s performance and prospects? No questions on the earnings call.
At the moment, Amsellem says he is in the doghouse with drugmaker Allergan Plc, which he has had a neutral rating on since 2016. In a May report, he cited “squandered opportunities and suspect judgment” and called for “a change in senior leadership.” He hasn’t been called on to ask a question for the past three Allergan earnings calls.
Amy Rose, a company spokeswoman, says Allergan regularly calls on analysts who are neutral to negative on the stock. With more than 20 analysts covering the company and time for eight or 10 questions per earnings call, she says, the company can’t call on everyone. Allergan executives met with Amsellem in 2016 to address questions and feedback.
Sometimes, the boxing-out strategy can backfire. Since the advent of social media, analysts who have been snubbed on earnings calls have plenty of other opportunities to make a stink elsewhere.
Enter Rich Greenfield of BTIG LLC. In recent years, Greenfield has emerged as a vocal critic of Walt Disney Co., taking the company to task on a range of issues, including over its streaming strategy for its pay-TV networks such as ESPN.
Disney executives, in turn, have shown little patience for Greenfield. They haven’t invited him to ask a question during a call for several years -- a slight Greenfield hasn’t shied away from publicizing. During one call in August, Greenfield posted a photo of himself on Twitter, wearing an ESPN T-shirt and waiting “in queue” with his hand raised in the air. Less than two weeks later, Disney Chief Executive Officer Bob Iger blocked Greenfield on Twitter. Greenfield protested, and the whole thing generated a bunch of media attention.
Even so, the situation has persisted. During Disney’s earnings call on Tuesday, Greenfield posted a photo of himself on Twitter, hand raised, with a Chewbacca filter superimposed on his face. Disney answered questions from multiple analysts. Greenfield wasn’t one of them.
— With assistance by Robert Langreth