The phrase “too good to be true” springs to mind regarding the latest rumors about Tesla Motors (TSLA), so don’t expect TSLA stock to disappear anytime soon.
The unfounded scuttlebutt is that Google (GOOGL) wants to partner with TSLA or buy it outright, and the rumor just won’t die. The same goes for rumors of Apple (AAPL) having an interest in TSLA.
As hard as it is to imagine such a deal with either of these companies going down, it would probably be the best thing that ever happened for the development of the electric vehicle industry.
The biggest catch is that it seems impossible that TSLA CEO Elon Musk would agree to any deal in which his role or the independence of the company would change. As much as he’s friends with — or at least respects — the top brass at Google and Apple, the TSLA CEO doesn’t seem like a guy who likes to be told what to do.
But such a deal sure would make lot of sense for TSLA stock.
Google has long shown interest in cars. One of its more high-profile moonshots is the company’s development of a driverless vehicle. As for Apple, pretty credible rumors have the company pumping resources into the possible development of an electric vehicle of its own.
When pressed, Apple execs have been cagey about the company’s plans to make cars one day — or partner with TSLA. That failure to issue a categorical denial fuels speculation that AAPL is up to something.
What TSLA Stock Stands to Gain
Apple execs have called the automobile the ultimate mobile device, fueling speculation about an iCar. It’s also impossible to imagine that AAPL would let GOOGL own a new industry without a fight. If GOOGL is really interested in getting into the electric vehicle business, AAPL won’t simply ignore it.
Perhaps most compelling, AAPL needs to find a giant area of opportunity if it’s to maintain anything like historical growth rates — and so does GOOGL, to a lesser extent. The law of large numbers is catching up to Apple. That makes it tougher for a new source of revenue to make a material difference to results unless it’s a whopper.
As great as the iPhone is for AAPL, the market for smartphones is limited by demographics. Sure, AAPL could launch yet another revolutionary product to carry it to a trillion-dollar valuation, but it could also just buy one. TSLA has a market cap of about $32 billion. If AAPL needed to, it could easily pay a 100% premium for TSLA stock.
GOOGL could likewise afford to purchase TSLA. But why would Elon Musk agree to sell?
As an optimist, Musk must believe that TSLA stock has more upside than any suitor would be willing or able to match. His role and ego are even bigger obstacles.
That said, TSLA is burning cash at such an unsustainable rate it may need to get involved in some kind of partnership. It wouldn’t hurt to have either AAPL of GOOGL’s vast resources at its disposal, too. After all, if AAPL or GOOGL were to buy TSLA, it would probably accelerate the development of a truly revolutionary electric vehicle.
For now, however, it seems outside the realm of possibility to expect Musk to agree to an outright acquisition of TSLA or any kind of partnership where his control is diluted.
Even if it would benefit TSLA stock.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
