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Buy it with what? GM and Ford have market caps of $60B. Tesla has a market cap of $20B. It couldn't be an acquisition, it would have to be a merger. A merger wo

Buy it with what? GM and Ford have market caps of $60B. Tesla has a market cap of $20B. It couldn't be an acquisition, it would have to be a merger. A merger would: - put Elon Musk de facto in control of Ford/GM, as by far the largest shareholder; - give people who are now holding big chunks of Tesla stock big chunks of Ford/GM stock. I can't imagine Ford/GM being happy about #1, and I can't imagine Tesla shareholders (including Elon) being happy about #2.

ZachPruckowski 13y ago
Tesla's P/E ratio is literally 1000-1[A]. Most of that market cap of $20B is based on expectations that Tesla is going to have hockey-stick growth rates over the next 5-10 years. So in order to keep that stock price, they need to go gangbusters - "we sold more cars than last year" is bad news for them because investors are counting on them to like double or triple sales. A sustained anti-Tesla campaign (which you'll notice is already underway) combined with a few minor setbacks could cause some big stock price losses and make Tesla a more attractive buy. Personally though, I don't think it's that likely that Tesla will be acquired in the near term. The only reason the article gives is "GM sucks at making electric cars for consumers" and buying Tesla would help GM solve that problem. But the fact is that Tesla hasn't yet solved the real problem either - they can build kickass electric sports cars and luxury sedans, but that doesn't necessarily translate into a viable consumer car. Ford and GM have tried selling consumer-model electrics and they've failed because of budget - when you try to build an electric car with today's tech for $30K (the average US new car price) you wind up having to make a lot of compromises, even accounting for the generous tax credit. Ford and GM are building inadequate electric cars at roughly the $30K pricepoint, while Tesla's building a great electric car at twice the price. Tesla's doing a lot of clever engineering and making good cars, but it's not really clear to me that "cut the Model S's price in half" is so much easier than "make the Volt/Leaf/etc. not suck" to justify a buyout/merger. [A] - Stock price divided by this quarter's project earnings per share.
- revelation 13y ago
  As usual, you can't take new technology and expect to instantly engineer it into a mass-market solution, and it certainly won't work if you then do a half-assed job. That, frankly, has been GM and others approach to electric cars. Tesla is eating up a large part of the global lithium production and is contracting with Panasonic and others to source massive numbers of custom batteries. Panasonic then goes and builds factories, a supply chain, etc. The massive scale here is what will drive cost reductions across the board. Some estimates are that Tesla is already only paying 100$/kWh of raw battery capacity.
mikeyouse 13y ago
How do you figure your first point? Musk owns 27.1% of Tesla as of their most recent 10Q. Today's closing market cap is $19.06B, putting Musk's share at $5.16B. GM's market cap is $56.75B. Assuming no 'synergies' between the merged entity, the combined cap should be around $75B. Musk's $5B worth of Tesla would make him a 6.67% owner of NewCo. For comparison, the UAW owns 140M shares (10% of GM) and the Canadian Government owns 110M shares (7.5% of GM), putting their ownership of NewCo at 7.6% and 5.6% respectively. Numerous institutional investors would also have single-digit percentage ownership. The story at Ford would be slightly different since they don't have the big slugs of ownership, but their market cap is very similar to GM's, easily preventing 'control' of the entity to fall entirely on Musk.
- hkmurakami 13y ago
  doesn't the Ford foundation and/or the Ford heirs have significant ownership on Ford?
  - mikeyouse 13y ago
    They've actually divested significantly in the past few decades. They still own something like 40% of the voting shares, but only 2% of the common.

ZachPruckowski 13y ago

Tesla's P/E ratio is literally 1000-1[A]. Most of that market cap of $20B is based on expectations that Tesla is going to have hockey-stick growth rates over the next 5-10 years. So in order to keep that stock price, they need to go gangbusters - "we sold more cars than last year" is bad news for them because investors are counting on them to like double or triple sales. A sustained anti-Tesla campaign (which you'll notice is already underway) combined with a few minor setbacks could cause some big stock price losses and make Tesla a more attractive buy. Personally though, I don't think it's that likely that Tesla will be acquired in the near term. The only reason the article gives is "GM sucks at making electric cars for consumers" and buying Tesla would help GM solve that problem. But the fact is that Tesla hasn't yet solved the real problem either - they can build kickass electric sports cars and luxury sedans, but that doesn't necessarily translate into a viable consumer car. Ford and GM have tried selling consumer-model electrics and they've failed because of budget - when you try to build an electric car with today's tech for $30K (the average US new car price) you wind up having to make a lot of compromises, even accounting for the generous tax credit. Ford and GM are building inadequate electric cars at roughly the $30K pricepoint, while Tesla's building a great electric car at twice the price. Tesla's doing a lot of clever engineering and making good cars, but it's not really clear to me that "cut the Model S's price in half" is so much easier than "make the Volt/Leaf/etc. not suck" to justify a buyout/merger. [A] - Stock price divided by this quarter's project earnings per share.

revelation 13y ago
As usual, you can't take new technology and expect to instantly engineer it into a mass-market solution, and it certainly won't work if you then do a half-assed job. That, frankly, has been GM and others approach to electric cars. Tesla is eating up a large part of the global lithium production and is contracting with Panasonic and others to source massive numbers of custom batteries. Panasonic then goes and builds factories, a supply chain, etc. The massive scale here is what will drive cost reductions across the board. Some estimates are that Tesla is already only paying 100$/kWh of raw battery capacity.

mikeyouse 13y ago

How do you figure your first point? Musk owns 27.1% of Tesla as of their most recent 10Q. Today's closing market cap is $19.06B, putting Musk's share at $5.16B. GM's market cap is $56.75B. Assuming no 'synergies' between the merged entity, the combined cap should be around $75B. Musk's $5B worth of Tesla would make him a 6.67% owner of NewCo. For comparison, the UAW owns 140M shares (10% of GM) and the Canadian Government owns 110M shares (7.5% of GM), putting their ownership of NewCo at 7.6% and 5.6% respectively. Numerous institutional investors would also have single-digit percentage ownership. The story at Ford would be slightly different since they don't have the big slugs of ownership, but their market cap is very similar to GM's, easily preventing 'control' of the entity to fall entirely on Musk.

hkmurakami 13y ago
doesn't the Ford foundation and/or the Ford heirs have significant ownership on Ford?
- mikeyouse 13y ago
  They've actually divested significantly in the past few decades. They still own something like 40% of the voting shares, but only 2% of the common.