The basic case for Tesla is that it’s got some really cool technology, a head start in a field that we know – know! – is just going to be the next business hit. The case against Tesla is that they’re not really all that good at doing the actual building, the manufacturing to quality, and that they’ve got nowhere near enough capital to fulfill their plans to boot.
There is significant logic therefore in the idea that some other company in the same general area buy them. Say, someone with access to capital, someone with significant knowledge of mass manufacturing to quality and someone who is looking for a leg up to get ahead of the competition in the technological race. Thus the stories about VW buying Tesla.
Sure, it all makes sense. But not yet:
If VW doesn’t take out Tesla, someone else should
Sure, but when?
It was the sort of news bruised and battered shareholders in Tesla had no doubt been hoping for. After a terrible year, German car giant Volkswagen was reported to be eyeing a stake in its battery-powered rival. The shares sparked to life, and no doubt plenty of people were hoping a bidding war was about to break out. By the end of the day, VW had denied the report. Even so, that shouldn’t be the end of the story. Maybe VW will summon up the courage to buy the company, and maybe it won’t. We will find out in the next few weeks. And yet, if it doesn’t, someone else certainly should. Sure, Tesla has plenty of problems, and it may struggle to make money. But it also has some great technology, the…
And so on.
But the thing is Tesla is currently worth some $40 billion. And that technological leg up simply isn’t worth that amount. That price is significantly boosted by the fanboi enthusiasm for Elon Musk, one of the Great Salesmen of our time. That’s not something that’s going to transfer to a more boring corporate owner.
There’s also significant reason to believe that a near future price for Tesla is something more like $10 billion, or $4 billion, and estimates of a reasonable price of $0 are out there – and reasonable estimates they are too.
That is, anyone who leaps in to buy Tesla at current valuations is spending vast sums of money on value that won’t transfer over. So, yes, it might well be true that someone should buy the company but not yet. Buying it out of Chapter 11 would work, buying it on the way to it would as well. But current market valuation? Naaah, can’t see it.