The last time I heard a charismatic company CEO brag about his company’s future value was in 1999. The company was called Hikari Tsushin (9435) and its CEO Shigeta even had gold coin chocolates embossed with Y100 trillion ($1 trillion) market cap target. The share price below shows how well such hubris ended up in the gutter,
I wrote a piece on Tesla (TSLA) on the 15 risks the company faces in the real world. While Musk is an amazing salesman he is still a total novice in car production. To think the incumbent auto makers are asleep at the wheel on EVs is totally obtuse. These companies have been developing for decades but their biggest advantage is production efficiency and capability. Tesla is still trying to work out how to do it and finally Musk even admitted that. For him to arrive at that conclusion now is deeply concerning.
The bigger laugh I had was this $700bn market cap market cap story was rehashed by an investor in Bloomberg yesterday. This investor is parroting something Musk said back in Feb 2015. I would be very worried as an investor for them to fall into this myopic trap of believing in these so called visionaries who have just discovered what car makers have known for more than 50 years. The table above shows that Tesla is currently trading at a price/sales ratio (because it makes zero profit) of 18x that of Mercedes Benz which is in the sweetest product cycle for decades. It’s already 3x more expensive than Apple. Let’s not forget that Tesla’s revenues equals its subsidies.
In my view CEOs should shut up about their share price and focus on running the business and let the share price take care of itself although I’m guessing that further capital raisings are a given. Did anyone question why Toyota bought and then sold its Tesla stake? Of course Toyota saw the entrails and sold it because it holds nothing that Toyota doesn’t already have. Toyota with a flick of the switch can emulate Tesla’s EV success and actually make money doing it.