Elon Musk tried to sell Tesla to Apple
Over the years, speculations on Apple (NASDAQ: AAPL) to acquire You’re here (NASDAQ: TSLA) periodically swirled. Perhaps the most notable example was when reports surfaced in 2014 that Tesla CEO Elon Musk had met with Apple’s chief mergers and acquisitions (M&A) Adrian Perica. It was also when Apple launched Project Titan, its electric vehicle program that saw renewed investor interest following a recent Reuters report that the Mac maker is aiming for a launch by 2024 or 2025.
It turns out that Musk did try to set up a sale to Apple, but that was much more recently.
Tim Cook “refused to take the meeting”
The source of the information this time is not a speculative media report, but rather Musk himself. The eccentric billionaire shared the anecdote directly on social media, saying he tried to contact Apple CEO Tim Cook as Tesla struggled to speed up production of the Model 3. Musk has always described this period as “production hell” as Tesla entered the mainstream segment of the automotive market.
During the darker days of the Model 3 program, I reached out to Tim Cook to discuss the possibility of Apple acquiring Tesla (for 1/10 of our current value). He refused to participate in the meeting.
– Elon Musk (@elonmusk) December 22, 2020
For context, Tesla began production of the Model 3 in mid-2017, but faced a plethora of operational challenges related to manufacturing and deliveries. By the end of 2018, the electric car maker had solved many production issues, but then went into “delivery logistics hell,” according to Musk. This awkward final stage lasted until around mid-2019.
It is very likely that the “darkest days” Musk refers to were between mid-2017 and the end of 2018, when Tesla’s notoriously volatile stocks were trading mostly within a range. For a year and a half, the company’s market cap has fluctuated around $ 60 billion, or about 1 / 10th of Tesla’s current market cap, which stands at over $ 600 billion.
The revelation comes after Musk revealed last month that Tesla made “about a month” after bankruptcy during the Model 3 ramp. The story also recalls when Musk attempted to sell Tesla to Alphabet Google subsidiary in 2013 as the company tried to ramp up Model S production, as Musk is a personal friend of Google co-founders Larry Page and Sergey Brin.
In an odd parallel, Tesla’s market cap was only $ 6 billion at that time – about 1 / 10th of Tesla’s valuation during the Apple episode. This is twice that Musk sought a buyout during tough times, was able to survive, and then saw Tesla’s valuation soar. Don’t expect this to happen again, because another ten-fold jump from here would equate to a market cap of $ 6 trillion.
Tesla was ultimately successful in ramping up Model 3 production and deliveries. (I omitted 2020 from this chart because the company is now aggregating Model 3 and Model Y metrics due to similarities in vehicle programs.)
As Apple continues the Titan project, manufacturing will be one of the biggest challenges. Many experts have long expected the tech giant to capitalize on its long-standing strategy of outsourcing production to contractors, although this practice is less common in the industry. automobile industry than in consumer electronics.
Too expensive then and now
Given Apple’s penchant for small acquisitions as opposed to large acquisitions, it’s no surprise that Cook isn’t interested in a $ 60 billion purchase. This would be 20 times larger than its biggest acquisition to date (Beats for $ 3 billion in 2014).
This is especially true when you recognize that Tesla was trading at a significant premium over mainstream automakers at the time, a valuation gap that has now reached comical proportions.
At the risk of stating the obvious, it is inconceivable that Apple even flirts with the idea of buying Tesla today for more than $ 600 billion. As fun as it is to imagine an Apple-Tesla merger, investors should probably let the chimera die.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.