Tim Cook must be gutted.
What that chart doesn’t quite capture, of course, is that Apple Inc.’s CEO apparently had the chance to buy Tesla Inc. sometime back when the electric-car maker was valued at only a tenth of what it is today. This news surfaced like an early Christmas present after Reuters reported Apple has revived its electric and autonomous car ambitions, aiming to produce a model by 2024.
Here’s what we actually know about the reportedly forthcoming Apple car: nada.
Here’s what we actually know about Apple’s chance to acquire Tesla a few years ago:
A bit more to go on there. However, before you start quoting that as gospel over the eggnog, I would draw your attention to this earlier revelation from the same source:
So.
The “funding secured” tweet is apt here because that also surfaced during the “darkest days” period for Tesla and its CEO and involved plans to somehow sell the company (to Elon Musk, Saudi Arabia, or Volkswagen AG, as various reports had it at the time). Ultimately, of course, Tesla made it through that period, and its valuation has since shot up.
The timing of that shot up is interesting. As recently as October 2019, Tesla’s market cap was the same as at the beginning of 2018, around $50 billion. The ascent to $600 billion or so is essentially a 2020 story. Go back and look at that chart, and you will notice the lines are roughly parallel: Most of that $1.4 trillion gain in Apple’s valuation since the start of 2018 also occurred this year. It’s almost like something bigger might be going on.
Both stocks have benefited from massive multiple expansion; one getting a bit more love than the other.
Is Cook kicking himself for not buying Tesla when he had the chance? I suspect that, in some well-appointed office deep inside the Apple Park donut, the soft thud of self-kicking is not to be heard. Musk may well have “reached out.” On the other hand, the gossamer-veiled dig at Cook’s apparent short-sightedness contained in the Tesla CEO’s tweet suggests this may be more about taking the shine off Apple’s rumored vehicle ambitions. Musk has been known to lash out on Twitter. There is also some history here, given Musk once dissed Apple as a “graveyard” for defecting Tesla employees. That was a few years before he apparently reached out to the chief gravedigger.
In any case, the episode does raise some interesting implications. Chief among these, of course, is exactly what Apple’s long-running vehicle ambitions are at this point, with possibilities ranging from a full-fledged, self-built machine to a package of software and hardware to be licensed out.
As for timing, the on-and-off progress of the company’s so-called “Project Titan” makes that guesswork, especially in a field like autonomous vehicles, where reality has a way of colliding with ambitious schedules. Musk’s tweet implies Apple has missed the boat on all this, and maybe there is some truth to that. On the other hand — and I’m only speculating here — Apple seems like a company that knows what it’s doing, more or less.
What all this does reinforce, however, is my sense that Tesla is using the run-up in its stock multiple to effectively recapitalize the business. As I wrote here, for all of Tesla’s qualified statements of being self-funding, or thereabouts, it has announced more stock issuance in 2020 than in the past decade combined. Generally, companies only issue nominally expensive equity when they need to.
In that context, it’s worth noting that Apple spends $14 on R&D for every dollar Tesla does. Cook’s company also generates as much free cash flow in 10 days as Tesla does in a whole year(1). If he wants to make a splash in the car business, he’s probably got what it takes.
(1) All these data refer to the four-quarters through September 2020.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal’s Heard on the Street column and wrote for the Financial Times’ Lex column. He was also an investment banker.
