There’s still plenty of time for Apple to purchase Tesla, which many financial analysts see as a good business decision. However, for the deal to go through, it will cost Apple a little bit more money than previously anticipated.
Since Tesla became public in 2010 as an IPO, the company’s stock rose from $20 per share to almost $400 during one of its fiscal quarters for 2017. Tesla is now gaining at a market cap which has reached $60 billion. That is a net gain to investors at 1,200 percent.
Apple, on the other hand, has the potential to build on the new tax reform bill, once the company sends $250 billion in cash from overseas which has been shielded from the previous corporate rate. Even after Apple pays the company’s share of taxes owed to the government, when the funds are received, the company will still have an excessive surplus to invest. The surplus could cause Apple to continue its tradition of small company acquisitions which presents the opportunity to purchase Tesla.
The question now remains- Is Tesla overvalued? In an interview with Rolling Stone Magazine, Tesla CEO Elon Musk admitted that he wished the company had remained private. “It actually makes us less efficient to be a public company,” stated Musk. However, the fact that Musk’s compensation package is tied to the company’s market performance makes the statement to the magazine in November 2017 very puzzling now. As of the final fiscal quarter for Tesla, the board of directors predicts a $650 billion market cap.
There is plenty to quantify within the board of directors theory and Tesla reaching the target predicted; however, Musk’s downplay of the potential echoes second-guessing investments despite the optimistic, yet far-reaching formulation, by the board of directors.
Apple CEO Tim Cook has already made it public that the company has ambitions towards autonomous car technology. In June 2017, when asked about the projects that the company is working on, Cook stated, “core technology that we view as very important,” as a nod to Bloomberg news that Apple had already begun the autonomous project.
With more than $250 billion cash on the balance sheet last year, the deal between Apple and Tesla was already primed and ready. The $70 billion value of Tesla at the time was a bargain compared to the optimistic predictions by the board of directors.