Investor's Corner
Tesla’s word of mouth strategy in focus: Why Elon Musk’s owner-based initiative works
Tesla’s (NASDAQ:TSLA) avoidance of traditional advertising initiatives is one of the most recognizable things about the company, yet it is one that has been questioned several times over the years by Wall Street analysts, investors and even avid fans. Yet, despite these questions, CEO Elon Musk’s answer has always been the same: Tesla does not do traditional advertising. Musk emphasized this point during the last earnings call too, stating that if Tesla would do some form of marketing, it would be strictly informational in nature.
“What we’re seeing is that word of mouth is more than enough to drive our demand in excess of production. We have no plans to advertise at this time. At some point in the future, we may do advertising not in the traditional sense but more to just inform people and make sure they are aware of the product, but not engage in the typical trickery that is commonplace in advertising,” Musk said.
In a conversation with Teslarati, investor and economist @Incentives101 explained that if one looks at Tesla’s word-of-mouth strategy from a mathematical perspective, it would seem that Elon Musk’s stern stance against traditional advertising may actually be well justified. Considering the manner that Tesla has been growing so far, the economist noted that “Elon is probably right. They don’t need advertisement and probably will never need it.” The following sections explains this point.
How Customers Learn About Tesla
There are generally three ways a new customer could learn about Tesla and its products: 1)Elon’s/Tesla goodwill, 2) customers’ own research, or 3) through an existing Tesla owner. Tesla relies heavily on current owners spreading the word and converting people they know into new electric car owners. Most people call this strategy the “Network Effect,” but the economist states that this is a misinterpretation.
“The Network Effect is technically applied to how a product increases its value from a network. The telephone is the most obvious example. One or two telephones in the world are useless, but the more there, are the more useful they become. In a way, you have to treat this like a disease. If you analyze (Tesla’s) strategy, you not only need information to flow. You need the information that changed hands to have an effect. In this case, the purchase of another Tesla. The most similar models to this strategy out there are how diseases spread,” the investor said.
These mathematical models try to predict how a disease will be spread considering different assumptions and variables. Among those variables are the number of susceptible individuals, of infected people and of recovered people, as well as the rate of contagion. For purposes of this illustration, information is equal to a virus and the main variables are the number of people that want to buy a car in that period of time within a target price range or TCO (susceptible individuals), the number of owners at the time (infected people), and the average number of people that an owner would convert in that period of time (contagion). This will be referred to in this article as the ‘T’ variable.
How Tesla spreads
The investor explains this further in the following statement. “The easiest way to understand this is the following. Imagine you’re looking at a decision tree. Each node is a new person with a Tesla in a period of time and how many nodes come out of that person is our ‘T.’ In each period of time that you’d want to measure, there are more assumptions that would need to be made. For example, an owner never ‘recovers’ so not only they ‘infect’ people but they will be contagious in perpetuity.
“Let’s analyze the spectrum of possible solutions. If T>=1, it would mean that information is flowing very efficiently and it will behave exponentially even if the time it takes for an owner to spread enough information to convert someone is relatively high. You need to consider that today, there are more than half a million owners. The faster the person transmits the ‘virus,’ the better,” he said.
There is no way to approximate these variables with the information available to us today. But recently, Tom Randall from Bloomberg released the findings of a study involving 5,000 Model 3 owners. According to the study’s results, 99% of Model 3 owners are pretty much satisfied with the vehicle, and they are willing to recommend the electric car to friends and family. A number of assumptions could be drawn from these results, as per the investor.
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“If you consider what would be the worst scenario for Tesla, it would mean a very long time for contagion to spread, with the ‘T’ variable being very close to zero. But with the information provided in the Bloomberg report, there is a very high probability that ‘T’ is not close to zero at all. Instead, there’s a good chance that ‘T’ is probably very close to 1,” the economist said.
Growing Without Traditional Advertising
These assumptions would mean that Tesla can continue to grow without engaging in traditional advertising. Looking at Tesla’s history, we can see that this strategy or combination of strategies have worked. But is there an optimal time to have an information campaign? “It seems that the sooner, the better” the investor explained. “If you look at how this strategy functions, theoretically, the best time to have an information campaign is when they’ll have the least amount of owners and when they’ll increase production dramatically. So in theory this means in the next few months as Tesla continues to hit its stride with Model 3 and begin producing the Model Y, high volume vehicle that Elon Musk expects will outsell the Model S, X, and Model 3 combined. This doesn’t mean they need one, it just means it could be the best time,” he added.
It wouldn’t be accurate to assume that this strategy or combination of strategies is what creates demand. Any company could choose to have either this strategy or spend millions of dollars in advertising and demand wouldn’t necessarily go up or down. “Consumers need information to make decisions — it’s a very important factor — but demand is a function of several factors, particularly consumer preferences. Under perfect information, there is zero doubt demand for Tesla’s will rise as we explained in this note,” the investor noted.
“Tesla’s word-of-mouth strategy helps spread information, but if this product didn’t have a fundamental effect in consumers, it wouldn’t really matter. I’m confident that if banks or media had someone looking at this problem from the consumer side, we would never see a note about alleged ‘demand problems’ again. Tesla has never had a demand problem and data shows that they won’t face one. But they might face an information gap, particularly with how media misinforms consumers,” the economist said.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
SpaceX stock did the opposite of what most of Wall Street expected this week, when the day designed to be its most dangerous turned into a rally, and the rally kept going.
Thursday marked the first major lockup expiration since SpaceX’s June IPO, making roughly 911.5 million insider held shares eligible to trade for the first time, more than doubling the company’s public float. Analysts and short sellers had spent weeks bracing for a flood of selling, especially after the stock fell 13 percent following its first earnings report as a public company on Tuesday. Instead, shares rose 6.1 percent Thursday to close at $114.92, and by Friday they were trading near $129, up more than another 12 percent on the day.
SpaceX shorts get warned by Musk ally, echoing Tesla’s early struggles
The setup made the outcome notable. Short interest had climbed to roughly 34 percent of the float heading into earnings, among the highest of any large cap stock, with about 95 percent of available shares to borrow already on loan. CEO Elon Musk warned short sellers twice in the weeks before the lockup, writing on X that “the survival probability of firms who maintain a significant short position in SpaceX over time is very low,” then following up on the morning of earnings with “I try to warn them, but they just double down.”
When the newly unlocked shares hit the market and the selloff never showed up, some of that short position appears to have started unwinding. TipRanks reported that options activity shifted toward bullish strategies like put selling and risk reversals following the rally, with roughly $600 million in options premium trading Thursday alone. Retail buyers also stepped in during the earnings dip, according to Vanda Research.
The fundamentals behind the stock have not changed much in a week. SpaceX’s revenue nearly doubled year over year to $7.8 billion, with Starlink subscribers doubling to 12 million and the company’s AI segment growing 247 percent. What spooked investors on Tuesday was the spending side. Capital expenditures jumped to more than $18 billion for the quarter, up from $2.8 billion a year earlier, with AI investment alone rising from $749 million to $15.8 billion. Wall Street remains split on whether that spending is building infrastructure SpaceX needs or outrunning what the business can currently support, a debate Teslarati has tracked since shares first came under pressure.
None of that resolves the bigger question hanging over the stock. Thursday’s release was only the first of nine staggered lockup tranches, with roughly $800 billion worth of additional shares scheduled to become eligible through October, and Musk’s own stake stays locked until next June. If this week is any indication, the market is treating that supply as something it can absorb rather than something to fear, at least for now.
Cybertruck
Tesla Cybertruck production snaps back after ugly supplier fight
Cybertrucks are piling up again at Giga Texas after Tesla’s court win against a parts supplier.
Cybertruck production at Giga Texas is showing its first visible recovery since Tesla sued a supplier last month over withheld manufacturing tooling.
Aerial observer Joe Tegtmeyer flew over the Austin factory Wednesday morning and counted roughly 100 or more Cybertrucks filling the outbound lot, a sharp jump from the thin numbers seen in recent weeks. The flyover came a day after a judge granted Tesla a temporary restraining order against Angstrom Automotive Group, the parts supplier at the center of the dispute.
Tesla filed an emergency lawsuit in late July after Angstrom told the automaker it planned to close the Troy, Texas facility where Tesla’s die-cast tools, trim dies and other Cybertruck stamping equipment were housed. According to Tesla’s complaint, a shipment of 700 finished parts never left the building, and when Tesla sent representatives to retrieve its equipment, accompanied by law enforcement, they were turned away. Angstrom allegedly then asked for an extra $250,000 a week to keep operating, which Tesla’s filing described as holding its own property for ransom.
TESLA: U.S. District Judge Christopher R. Wolfe of the U.S. District Court for the Western District of Texas, Waco Division granted Tesla a Temporary Restraining Order and Writ of Replevin in its dispute with Angstrom Automotive (Case No. 6:26-cv-00477).
The order authorizes… https://t.co/E1DKcQSxMn pic.twitter.com/LR8aAiV2Og
— S.E. Robinson, Jr. (@SERobinsonJr) August 5, 2026
The restraining order gives Tesla immediate right of entry to Angstrom’s facility to recover the tooling. It is temporary, with a fuller hearing still to come, but the speed of Wednesday’s rebound suggests the Angstrom shortage was indeed the main bottleneck limiting Cybertruck output. Outbound lot counts are an imperfect measure of actual production, since finished trucks can sit for days before shipping, but a lot that full after a lean stretch is a meaningful signal.
Cybertruck output at Giga Texas has fluctuated all year as Tesla worked through supply issues and introduced new trims, including a cheaper Dual Motor AWD version that drew strong early demand.
Venture capitalist Chamath Palihapitiya has cautioned investors shorting SpaceX shares, drawing a direct parallel to the intense short-selling pressure Tesla faced in its early public years.
Responding to reports of elevated short interest in the newly public rocket, satellite, and AI company, Palihapitiya noted that similar dynamics played out with Tesla, where aggressive short sellers ultimately “went broke.”
SpaceX (NASDAQ: SPCX) went public on June 12, 2026, in the largest IPO on record, pricing at $135 per share. Shares quickly surged to an all-time high of $225.64 just days later, briefly implying a valuation exceeding $2 trillion. The stock has since retreated sharply amid valuation concerns, lockup expiration fears, and broader market dynamics.
By early August, it traded near $108–$125, representing a roughly 50 percent decline from the peak and bringing the market capitalization closer to the $1.5–1.7 trillion range. On August 4, shares closed up more than 9 percent at $125.33 ahead of earnings before facing pressure in after-hours and premarket trading.
Short interest has climbed dramatically. According to S3 Partners data widely cited in market reports, short positions reached approximately 219.3 million shares by late July, about 34 percent of the limited public float of roughly 640 million shares, and represented a notional value of around $24.6 billion.
Utilization of shares available to borrow hit 95 percent, with borrow fees rising. This level of shorting exceeded the dollar value of short bets against Tesla at the time and built rapidly ahead of two catalysts: the company’s first post-IPO earnings and an August 6 lockup expiration that could free up to 911.5 million additional shares.
CEO Elon Musk has issued warnings of his own. In mid-July, as short interest approached one-third of the float, he posted that “the survival probability of firms who maintain a significant short position in SpaceX over time is very low,” reiterating his view that the company could ultimately be worth more than Earth if it achieves its goals.
On August 4, just before earnings, Musk responded to the latest short-interest data by saying, “I try to warn them, but they just double down.”
SpaceX delivered its first quarterly results as a public company after the close on August 4. Second-quarter revenue rose 92 percent year-over-year to $7.8 billion, beating consensus estimates near $6.8–6.9 billion.
The net loss narrowed to $541 million, or 9 cents per share, better than the roughly 23–24 cent loss expected. Starlink/connectivity contributed about $4.3 billion (up 66 percent), while the AI business generated $2.6 billion (up roughly 250 percent). Capital expenditures were heavy at $18.4 billion, largely tied to AI infrastructure. Management projected a $100 billion annualized revenue run rate by year-end 2026 and outlined a path toward $1 trillion in annual revenue by 2030.
The combination of Chamath’s historical reminder, Musk’s repeated alerts, and the company’s ambitious growth targets underscores the high-stakes debate surrounding SPCX. Short sellers are positioned for near-term supply pressure from the lockup, while long-term bulls point to Starlink scale, Starship progress, and AI compute expansion as reasons the bears may ultimately face the same fate as many early Tesla skeptics.
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