Apple tried to buy Tesla for more than it’s currently worth in 2013, report says

https://electrek.co/2019/05/21/apple-buy-tesla-2013-report/

by doener • 7 years ago

174 125 7 years ago

Analemma_• 7 years ago

Until someone from Apple or Tesla confirms this, it should be treated as a rumor and not taken at all seriously. Investment bank analysts are full of shit, and the ones covering Apple doubly so. Remember Gene Munster and the Apple TV set he said was totally, definitely coming any day now... for a decade?

juskrey• 7 years ago

* until someone from Apple or Tesla denies this

mikekij• 7 years ago

As a Tesla optimist, it seems like their biggest constraints are cash and the distraction of quarterly earnings calls with analysts. Apple could use that huge stockpile of cash to allow Tesla to continue playing the long game, without having to worry about their stock price fluctuating every day.

Shivetya• 7 years ago

Well I would expect Apple's biggest contribution would be better supply chain management, product focus, and UI improvements.

Tesla suffers from Musk's lack of focus. There are well past the time someone who is not a product person provide some structure to operate within.

mft_• 7 years ago

From what I've read, totally agree: they need a strong COO to focus on delivery. A Gwynne Shotwell or --funnily enough-- a Tim Cook of old.

(It's odd that Elon presumably sees the benefit of Gwynne at SpaceX yet doesn't replicate the formula at Tesla.)

tyre• 7 years ago

And you would think Elon could still be given free reign, but I suspect he would reject this out of hand because he wants to stay in absolute control.

We obviously don’t know everything behind this, but Tesla’s in perpetual turmoil internally and externally. They’ve done incredible things and at the same time put that in jeopardy. Elon has huge upside but can be his own worst enemy at times (get the fuck off of twitter)

dangero• 7 years ago

Apple can't buy Tesla and let Musk have free reign because it will expose them to potential liabilities much larger than their investment in Tesla.

Example: -Stock manipulation would now be manipulation of Apple stock. -Autopilot related deaths and quality issues now create lawsuits against Apple's bank account and reputation.

dwighttk• 7 years ago

That's assuming Tesla has something Apple can't get elsewhere with the cash.

kovek• 7 years ago

Why would Elon Musk worry about the stock price fluctuating? How is the company affected by the stock price? The only thing I can think of is as follows: When the company needs liquid capital, they sell shares that they already own, and in that case a higher stock price is more beneficial.

xkjkls9• 7 years ago

They also pay their employees using a large amount of stock. A poorly performing stock means poor morale and more difficulty recruiting.

xkjkls9• 7 years ago

Well, cash and a distraction of earnings calls is a symptom of the real problem, weak demand. The 3 has been cannabalizing the S and X, which before were the major high margin products that sustained the company.

If they have to keep raising cash just to keep themselves afloat, there’s never going to be any return for shareholders. It will all get eaten by debt and dilution.

rockinghigh• 7 years ago

The comparison is misleading because Tesla had 120M shares outstanding in 2013 versus 170M shares today. $240 per share at the time is equivalent to $169 per share today or $28B in market capitalization. It’s still 15% cheaper than today’s share price.

earthshot• 7 years ago

You need to adjust for cash and debt to get the enterprise value. If you do so, you’ll find that Tesla is worth about 50% less than it was.

gpm• 7 years ago

Do you mean more?

Because according to the comment above debt is 11B, and I happen to know that they have ~2B cash on hand, so roughly speaking enterprise value should be 9B larger than market cap right now, and it should have been less than 600M above market cap back then (their old debt value also listed in a comment above).

Reason077• 7 years ago

Enterprise value is not derived from market cap.

Rather, market capitalisation reflects investor’s assessment of the enterprise value.

Whether rational or not, this already takes cash and debt positions into account.

ajross• 7 years ago

That's not right either. The (incorrect) headline isn't about what Tesla is "worth" to Apple, it's what the purchase price would have been. The market has already priced in things like growth expectations and debt load, that's the whole point of having a stock market in the first place.

bryanlarsen• 7 years ago

Also, the buyer would be assuming $11B in debt rather than 600M in 2013.

thegranderson• 7 years ago

As those below mentioned, you have to use TEV here. Based on TSLA Q2 2013 vs. Q1 2019 financials, you end up with a TEV in 2013 of $28.2B vs. today of $44.3B.

The 2013 calc is:

$240/sh * 118mm shares = $28.4B market cap, less $746mm cash, plus $576mm debt = $28.2B TEV

The 2019 calc is:

$204/share * 173mm shares = $35.3B market cap, less $2.2B cash, plus $11.2B debt = $44.3B TEV

For those mentioning subtracting the debt, that's incorrect. A company is capitalized with equity and debt. To buy the whole company, you have to buy both. But when you buy the equity, you get the cash, so you subtract that out, since buying cash isn't relevant. You then have to add the debt, because you have to pay off all the debt to own the company outright.

kgwgk2• 7 years ago

That comparision is also misleading, arguably more. The title should be "Apple tried to buy Tesla shares for more than they are currently worth": 2013 shareholders would have done much better by selling at $240 then rather than holding down to $205 six years later.

InTheArena• 7 years ago

This has been openly talked about for a while. It makes all the sense in the world - Apple wants to get into this space, and has the pieces that Tesla is missing - supply chain optimization, good capitalization and strong marketing. Tesla has what Apple is missing - vision, electronics, deep learning experience.

I'm still amazed that this hasn't happened yet.

blantonl• 7 years ago

That, and Netflix.

Apple truly would expand their footprint into the daily life of hundreds of millions of people.

the_other2• 7 years ago

I already feel like I spend too much with Apple. If they bought Netflix, I'd probably stop watching TV.

enonevets• 7 years ago

I'd vote for acquiring Disney over Netflix at this point.

rb808• 7 years ago

This makes no sense. Apple makes computers. A car company is completely different, even it if Tesla's have bigger screens than other cars. There is no money in making cars, Apple is worth more than all the other car companies put together.

frenchie4111• 7 years ago

Or, that's why it makes sense. Apple wanted to move into the car market, and this would be a way to bootstrap that movement.

josefresco• 7 years ago

If there is "no money" in making cars, what is the growth path for Apple? Who or what should they acquire?

sc903• 7 years ago

Transportation?

Someone• 7 years ago

There likely is lots of money in health. Almost everybody claims it’s the most important thing to them, the aging population gets more health problems and many of them also get more disposable income (kids left the house, fewer holiday trips due to declining health)

That’s probably a big reason for the existence of the Apple Watch and HealthKit.

gradys• 7 years ago

Apply s/car/phone and it was all true in the mid-2000s as well. Maybe they saw an angle you're not.

sephlietz• 7 years ago

Is this meant to be parody (car => phone) or real? I honestly don't know, but if it's not parody, then I'm super curious about "no money in making cars" part.

svachalek• 7 years ago

I don't know if it's perfectly true or not but the common wisdom these days is there's "no" profit in making stuff. Cars, airplanes, toys, clothes, whatever. The "real" money comes from locking in some kind of monthly payment, whether it's a loan or a service plan or insurance or whatever. If they can't do that, they want to collect your data and sell that on an ongoing basis. I hear GM and some other car companies essentially use cars as a way to sell loans. No matter what you buy now, everyone wants to build a "relationship" (money pipeline) with you.

skellington• 7 years ago

No, this makes complete sense. Tesla is opening up a huge new market, but it is under-capitalized. Also, Apple could give Tesla the design boost is desperately needs in the long term (those interiors barf...).

Those darn Tesla speculators were driving TSLA into unpurchaseable levels which in the long run may end up killing Tesla. Irony.

MegaButts• 7 years ago

I suspect if it weren't for the TSLA speculators the company would've run out of money already, so they may be the reason it's still around.

Whatever the case, TSLA stock defies all reason and epitomizes "the market can remain irrational longer than you can remain solvent."

xkjkls9• 7 years ago

Why do we assume designing cars is the same as designing phones? Automotive design has been around for 100s of years before phones.

And why is this market presumed to be entirely new? Many of the auto manufacturing talents of old are still just as important in a new EV paradigm. Cars might not need combustion engines, but it’s not like the don’t need wiper blades, or seats, or paint, or branding, or a commitment to reliable manufacturing.

dasil003• 7 years ago

Where is their growth gonna come from though? Their margins on iPhones are not sustainable and there’s no huge growth in general purpose computing on the horizon. If ever a company was primed for a capital-intensive moonshot it would be Apple.

newsgremlin• 7 years ago

Elon Musk isn't the only person trying to take over the world, some private entities just go about it a different, more subtle way due to a lack of personality or humanity. The only way to continue growth for apple is to expand into other industries that can contribute to the "apple ecosystem".

fsloth• 7 years ago

Apple made "just computers" before 2008.

Apple makes digitally enabled products that makes sense financially and is compatible with the brand. That's it. Everything is a digitally enabled product nowadays.

So the question is not what Apple is selling now, but what is compatible with their brand. They have the warchest to enter any market they wish.

ksec• 7 years ago

This is exactly the same argument with Apple making a Phone. You can read what Palm, and Blackberry have said during the iPhone revolution era. And we all know how that turns out.

Your Phone isn't really a phone anymore. When was the last time you actually make or receive a call on it? Vs doing something else, Gaming, Content Consumption, Taking Photos etc. Despite using the name Smartphone, your iPhone is more like a Pocket Computer, or what Apple envision Newton in the 90s. A pocket computer that can also make a call when it needs to.

It is the same with Cars, AV ( autonomous vehicle ) will be nothing but a massive Computer with Batteries running on Wheels. Having said that, I think we now know Full AV isn't coming any time soon, at least not in the next 3 - 4 years. But there will be lots of R&D between now and then. Apple had lots of pieces of iPhone tech even before they started, and they still need 4 years to make it work. The Apple Car, or Project Titan will likely take a lot more time .

the_other2• 7 years ago

Despite using the name Smartphone, your iPhone is more like a Pocket Computer

Just today I started calling them "phones", quotes included.

rchaud2• 7 years ago

You can read what Palm, and Blackberry have said during the iPhone revolution era. And we all know how that turns out.

The majority of comments made pooh-poohing the iPhone were made at public events, and intended to assuage the customers, carriers and partners present that those events. It's not reflective of what they actually believed.

In books like "Losing the Signal" (about Blackberry), journalists followed up with Blackberry execs and discovered that BB considered the iPhone a gamechanger, even if they doubted that the AT&T 3G network could handle millions of data-hungry iPhones. And in the early days, that was true. The first 3 generations of iPhones had significant complaints about dropped calls.

rconti• 7 years ago

Well, we know that Apple was working on self driving cars too, so... not surprising?

S_A_P• 7 years ago

I think that the fact that either Alphabet or Apple could easily buy Tesla in cash is a great reason not to short the stock.

toomuchtodo• 7 years ago

I encourage short sellers to make the attempt still. It makes things interesting.

_jal• 7 years ago

I think the fact that it comes with a mercurial CEO with discipline issues subtracts quite a bit from a potential acquirer's price.

Think about it - if you were considering buying the firm, what odds would you put on your first board meeting after being all about whatever the hell Musk got up to last week?

athenot• 7 years ago

In the case of Apple, Tim Cook has spent quite a while working with Steve Jobs so he's no stranger to collaborating with a loose canon and could probably handle Musk pretty well.

Just speculating, of course.

soup10• 7 years ago

No way Tesla could do that unless Musk is somehow forced out.

Phillipharryt4• 7 years ago

Musk owns 19% of the company, so he can't block a takeover through ownership alone.

maxxxxx• 7 years ago

Why would they buy Tesla though?

Gpetrium• 7 years ago

Shorting of a stock is used for both speculation and hedging a position. Tesla has been on a continuous downwards bear trend for the past YTD, so it is very likely that quite a bit of money has been made shorting Tesla up until now.

Just because a few players are able to buy Tesla entirely, it does not mean that shorting a position is necessarily bad.

unicornfinder• 7 years ago

The fact that they're not might be a good reason to do so though.

ggg23• 7 years ago

they probably avoid it just to not risk having Musk sneaking into the board, or $deity forbid, as CEO.

heck, that alone would be reason enough for me.

foobiekr2• 7 years ago

Tesla has huge liabilities in terms of debt and (probably under-accouted-for) warranties. Even if the stock dropped to $1, wouldn’t this be the biggest Apple acquisition in company history? Tesla has 12+B in debt and other liabilities and is losing nearly a billion a quarter. That’s four Beats and another one per year.

mattnewton• 7 years ago

What else are they going to do with their cash horde except make big acquisitions? Strategically, I think this could make sense in the long term, even if it loses for a very long time, just for the battery research team and the foothold into the electric car business.

freerobby• 7 years ago

Apple could pay off all of Tesla's debt with like 5% of its cash reserves. Tesla is highly ratioed, but that's a function of its own financials -- to a company like Apple, the debt isn't very scary.

xkjkls9• 7 years ago

Doesn't mean they will though. Both Alphabet and Apple have scaled back their auto ambitions since 2013.

brmgb3• 7 years ago

On the one hand, Apple has a lot of experience in domains where Tesla has been less than great (supply chain, manufacturing) and software is slowly becoming a key differentiator for the automobile industry so I can somewhat see where synergies might exist.

On the other hand, automobile is quite far from Apple core business. I know that there is not much growth remaining in Apple key markets but still if I were a shareholder, I'm not sure I would be comfortable with Apple making such a move.

I guess we are entering a new golden age for conglomerates.

NicoJuicy• 7 years ago

I'm not sure if supply chain optimalisation is the same as manufacturing robotics that Tesla needed though

brmgb3• 7 years ago

I'm far from convinced Tesla actually needed so much robotics. Relying on robots so much might actually have been a strategic mistake due to their inexperience. It looks to me like this bet has still to pay off.

Nevertheless, Apple knowledge goes a lot further than supply chain optimization. They are actually quite good at manufacturing (both manual assembly and robotics).

They know how to design products optimized for large volume production. They know how to work effectively with third parties. They know how to do quality control which is extremely important for a system integrator. Apple is not a pure software company: they already have a manufacturing culture in place inside the company.

What they don't have is domain specific knowledge so if they really wanted to enter the transport market, I guess buying Tesla could make sense.

screye• 7 years ago

As we keep getting better at operating at scale, logistics will continue economically favoring conglomerates over smaller companies.

Amazon is the best example of this, and I don't see why the likes of Apple won't follow suit.

Apple seems to be aggressively hiring from top institutes for their self-driving team. So, they might just have decided to go about the whole thing by developing a 1st party product instead.

djtriptych3• 7 years ago

Traditional autos are far from Apple's core business (whatever that is. software? hardware? design?) but Tesla isn't.

It's supply chain + manufacturing + software + batteries + sensor tech + gps. All things Apple has spent billions developing internally.

And how many Tesla owners also own an iPhone. I bet it's something like 80%_

brmgb3• 7 years ago

Apple's core business (whatever that is. software? hardware? design?)

Selling laptops and phones mostly segueing into digital services.

Tesla isn't.

Sadly, it very much is.

Tesla potential customers are not buying a Tesla in place of another batteries + sensor tech + gps. They are first and foremost buying a car.

ambicapter2• 7 years ago

And how many Tesla owners also own an iPhone. I bet it's something like 80%_

How does that help either of them?

sonnyblarney• 7 years ago

I'm really hesitant to buy the notion that supply chain - and especially manufacturing - for cars is even remotely similar to that for hardware.

And the fact that Foxconn and other suppliers actually do most of the grunt work there.

And there's the other end: retail. A $1K gadget you can stick in your pocket is a not a $70 thing that has all sorts of other impacts and externalities.

sc903• 7 years ago

Do electric bicycles pose a threat to Tesla (car companies in general)?

koverda• 7 years ago

Not any more of a threat than regular bicycles pose to regular cars.

jvagner• 7 years ago

I wish cities would commit to bike-only streets.

E-bikes are unbelievably fun ways to get around.

morkfromork2• 7 years ago

Pickup trucks are the top selling vehicles in the US. Hard to replace those with bicycles.

sc903• 7 years ago

Not really, a significant percentage of car trips involve a short distance.

ggg23• 7 years ago

would be interesting to see how much of this is real need for a pickup. there's a marlon brandon(?) movie where he buys the biggest ram truck, just to drive up and down the street every day :)

likewise, one could say that california has a need for SUVs, while everyone only drive them under 30mph in a perfectly paved roads under perfect dry weather, alone 90% of the time, and with a single kid the other 10.

At this point I think the america Lives on pickup truck production is just a fashion indicator that some car manufacturers love to disseminate to help their stock over japanese makers who are not heavy on pickups.

tdb7893• 7 years ago

Not really in most places in the US with the current infrastructure there. Even in many places that have fine infrastructure for it (like Minneapolis in my experience) weather makes it a hard sell.

solean• 7 years ago

Not everyone is an able-bodied 20-something, and not everywhere is sunny California.

Phillipharryt4• 7 years ago

This piece uses Ashlee Vance as a source. Having read and checked on facts in his books, his factchecking is sketchy at best. It's a somewhat believable rumour, but of course take it with a pinch of salt and consider that analysts like making big calls as well (usually backed by "anonymous sources").

w8vY7ER2• 7 years ago

I have enjoyed his writing so far and haven't found reason to question his fact checking yet. Can you offer any example for someone curious about the sketchiness you mentioned?

Phillipharryt4• 7 years ago

Musk himself claims it's rife with errors

https://twitter.com/elonmusk/status/895834554245709824?lang=...

and I recall some of his figures about initial tesla production being outrageous. Like body gaps of 40mm being deemed the target. Figures like that made me wonder if anyone had proof-read it because a 4cm gap in a car is enough to fit your hand through

fit2rule2• 7 years ago

This explains all that "iCar" nonsense. I mean, even as a seasoned and dyed Apple fanboix, I can honestly tell you, I don't want Apple to make cars.

I want them to make computers.

ambicapter2• 7 years ago

Are you mad that they make phones?

TomMarius• 7 years ago

They make pocket computers, actually

rchiniquy• 7 years ago

The validity of the comparison aside, if Apple had bought Tesla in 2013, I feel pretty confident Tesla would be worth more now than it is.

raverbashing• 7 years ago

Given the push Apple can do to things like battery factories, sensor manufacturers and other things it makes me wonder.

This is one of the Apple "secret sauces". Want Gorilla Glass? You get me the latest gen exclusively and I help you build your factory.

WalterSear• 7 years ago

It's had such a big effect, it's arguably the secret sauce.

throwayEngineer• 7 years ago

What would they synergize? Apple is known for marketing, which is already Elons speciality.

Tesla cars are first revision technology, which means almost starting from scratch anyway.

Two companies that live on reputation instead of quality would tarnish both.

xkjkls9• 7 years ago

Apple's limitless access to capital would be one. Tesla has really had dial down many of their ambitions because of how expensive it is for them to raise capital.

Traster• 7 years ago

Apple is known for its operations. Tim Cooke was head of ops before he was CEO, imagine Tesla produced the same cars as today, but when it wanted to ship its inventory to Europe it didn't tank an entire quarter of sales because of fuck ups? Or imagine if Tesla had a competent scale-up of manufacturing their Model 3. Those are the things that Apple could help a lot with.

jraines• 7 years ago

replace the plug with a lightning port and sell dongles

m463• 7 years ago

I think step one would have been to offshore everything.

That said, if Elon Musk had taken over apple from within (like steve jobs did via next) apple might have gotten more interesting.

beatgammit• 7 years ago

And it might also suddenly have money issues.

Elon Musk is certainly innovative, but he's certainly not a saver. He seems to like to take resources to grow as quickly as possible instead of growing at a controlled, steady pace like larger companies do. Basically, he's more "go big or get more funding" than "slow and steady wins the race".

Jobs was pretty good at design and hyping up modest improvements. Elon just wants to wow everyone.

magwa101• 7 years ago

Tesla is fucked, maybe Toyota buys them?

bduerst• 7 years ago

They already turned down VW.

objektif• 7 years ago

This makes sense to me, think about all the car related electronic components Apple can sell once cars start driving themselves. There are lots of opportunities.

shmerl• 7 years ago

Good thing Apple didn't swallow it.

buryat• 7 years ago

Saudis tried to buy Tesla for $420 in 2018

xkjkls9• 7 years ago

There is no evidence that this was ever true.

skinnymuch• 7 years ago

Any proof? An unsubstantiated tweet doesn’t count.

erpellan• 7 years ago

These days, I'd be suggesting Apple buy Jaguar.

Both brands have a reputation for design and customer satisfaction, and customers with a certain insensitivity to price.

Jaguar are reinventing themselves as a BEV company with the i-Pace. (Other car manufacturers like BMW and Audi are shoe-horning electric motors into their existing platforms, not redesigning from scratch).

Apple tried to buy Tesla for more than it’s currently worth in 2013, report says

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