Thursday, September 22, 2016

The 'Apple Buys Tesla' Story Is Making the Rounds Again (AAPL; TSLA)

The writer of this piece, Rob Cox, helped establish Breakingviews many years ago.

From Reuters Breakingviews:

Apple and Tesla really need each other now
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 
Great partnerships are often forged when each party enjoys a surplus of something the other needs and there’s little conflict in their ambitions. By that logic, two of Silicon Valley’s best known firms, Apple and Tesla Motors, really need each other right now. An investment in Tesla by Apple in return for some of the carmaker’s innovation dust might be just the ticket.

Apple Chief Executive Tim Cook is revamping the company’s approach to self-driving cars and the gadget maker’s broader role in the future of transportation. He just fired some of the company’s autonomous car team, according to the New York Times.

Along the highway at Tesla, founder Elon Musk needs billions of dollars of capital as he ramps the company up toward making a targeted 500,000 vehicles a year by 2018. He could also use an injection of corporate credibility as his proposed deal to buy his solar-panel venture SolarCity, also publicly traded, appears to be running into unanticipated headwinds.

The idea of Apple acquiring Tesla in its entirety isn’t new. It surfaced even before Cook poached some of Musk’s engineers a year ago. That move prompted Musk to tell a German newspaper: “If you don’t make it at Tesla, you go work at Apple.” But it might not require a full purchase to address the two companies’ strategic challenges – which, arguably, are each becoming most prominent in areas where the other could fairly easily help.

Musk’s hurdles are the most obvious. The entrepreneur who runs the $30 billion-odd Tesla is struggling to persuade investors of the merits of his plan for Tesla to acquire SolarCity. The deal, worth $2.6 billion when announced in early August, is supposed to create a “vertically integrated sustainable energy company.” Last week the deal was publicly panned by Jim Chanos, a prominent hedge-fund manager. By the math of the all-share deal, its market-implied chances of success have been falling, too. Shares of the solar-panel installer closed on Monday nearly 25 percent below Tesla’s offer price.

The acquisition and the potential ownership and family conflicts it throws up are a distraction for Musk from Tesla’s carmaking ambitions, not to mention the task of proving the safety of the company’s Autopilot feature after a fatal crash in May. Even if investors decide to back him in buying SolarCity, any slippage in either company’s plan could hurt their ability to hit up investors for additional funding. Both need regular cash injections – over $2 billion each last year – to fund operating and capital investment outflows.

Apple could easily address Tesla’s capital problem by buying, say, a 20 percent stake. While dilutive to existing owners – including Musk, who owns around 21 percent – that would bring in nearly $8 billion at $215 a share, just under a 5 percent premium to Monday’s market closing price....MORE

February 2015  
Apple Is Not Going To Buy Tesla (AAPL; TSLA)
At a minimum the instigator of the latest AAPL/TSLA rumor, Mr. Calacanis, should have lead his blog post with something like: "I was dreamin' when I wrote this, forgive me if it goes astray..."

This is at least the fourth fifth time this oddity has made the rounds and if it weren't for the fact the linked piece does such a nice overview of Tesla we'd ignore it as we did the previous iterations.

And seriously, is it too much to ask for trigger warnings? Please, please Mr. C., include trigger warnings if you are writing something moronic....
...We've been posting on Tesla since before the 2010 IPO and as far as I can remember there were rumors that Apple would buy Tesla in Feb and Nov. 2014 and May and Nov. 2013.
I may have missed some if they were going around earlier.