In November 2021, the world was still looking good for Tesla shareholders. Driven by analyst upgrades after strong third-quarter earnings and news that rental company Hertz had ordered 100,000 Model 3s. Tesla at the beginning of the month the highest closing price of $ 1229.91. Since then, however, it has fallen sharply with occasional rallies, and this Friday Tesla closed at half of the previous record. In this environment, investors are starting to call for companies to buy shares — something that CEO Elon Musk is at least paying attention to.
Tesla shareholders want a return
Shares of Tesla ended US trading at $204.99 on Friday — a 7.55 percent loss in a broader market that also had another bad day on new data on expected inflation. This corresponds to a decrease in half of the price since the record last November, because in 3 for 1 stock split in Tesla this August he gave. The maximum price adjusted for this effect was $409.97.
Such restrictions have always been seen as an opportunity for cheap purchases in Tesla, but this is not a guarantee that it will be the same this time. Private equity giant Leo Koguan seems to be anticipating that – in the past few weeks he always reported new Tesla purchases in a low mood in. He also suggested that the company should also take advantage of low prices. Such a purchase of shares reduces the number of papers on which the profit will be distributed, so it has a supportive effect on the price.
An open letter to Tesla’s Board of Directors – see attached.
And $TSLA trading at its lowest P/E (37x on WS 2023 EPS) since Covid, with $18.9B in cash and no debt and investment grade, now seems like the right time for Tesla’s BOD to consider a $10B+ stock buyback. pic.twitter.com/NX7vKJnxOr
– Gary Black (@garyblack00) October 13, 2022
Fund manager Gary Black, in whose futures fund Tesla is the largest position, also spoke in favor of such a move on Thursday. The stock’s price-earnings ratio is currently lower than ever, the company has around $19 billion in cash and expects $20 billion in free cash flow in 2023, he wrote in an open letter to Tesla’s board. An “aggressive acquisition” with an amount of at least 10 billion dollars should be considered urgently.
CEO Musk under pressure due to falling stock prices
Tesla CEO Musk did not respond to this proposal before, but he responded briefly to Koguan earlier this month: “It is clear,” he replied to his Twitter message on Thursday, saying that he had bought more Tesla, but continued losses that should be feared, against his. only a doubling of profits or a share buyback can help. That wasn’t a promise, but at least an indication that Musk cares about the needs of his shareholders.
In addition, the boss of Tesla himself is under pressure from losses in the segment because he needs it to finance the takeover of Twitter, which can now be completed without judgment and before the end of October. In the higher course he would have to pay for it its equity stake of up to $33 billion sell or borrow a few shares of Tesla. According to the fund manager Black, it would even be possible to combine the purchase and sale of Musk: According to lawyers of the capital market, Tesla could decide to buy back 10 billion dollars, for example, and take 5 billion dollars directly from the CEO.