The offer by Apple to acquire Tesla Motors in 2013 appears to be a colossal loss for Elon Musk now.
It’s no secret that Apple eagerly wants to enter the electric vehicle industry. The Cupertino giant has hired some of the best minds of the automotive industry to work under a project named ‘Project Titan’. The project, however, is still in the development phase and far from bearing fruits for Apple.
Recently, it is reported that there was a time when Apple was exploring possibilities of acquiring a car manufacturing company rather starting its own production. No better than Tesla Motors fitted the bill then.
The Offer By Apple To Acquire Tesla: Quite Lucrative
According to Craig Irwin, an analyst at Roth Capital Partners claimed that Apple made a “serious bid” to purchase Tesla Motors in 2013, with the offer price around $240 per share.
“This is something we did multiple checks on. I have complete confidence that this is accurate. Apple bid for Tesla. I don’t know if it got to a formal paperwork stage, but I know from multiple different sources that this was very credible,” Irwin said.
There were multiple instances in the past when the internet was abuzz with the rumours that Apple had a keen interest in acquiring Tesla Motors but this the first time a report has validated the claim. What’s even more interesting now is that Apple could still have an interest in Tesla Motors.
Apple could hit the jackpot if succeeds in acquiring Tesla Motors. In 2014, the appreciating market cap of Tesla Motors had put Elon Musk in a demanding position. The share value of Tesla was hovering $180 then and the market was confident about the performance of Tesla shares to new heights.
Fast forward 2019, Tesla is struggling as the shares of the company are underperforming. The company’s share value has dropped 34% since January this year, and industry experts believe that it will continue to drop. Hence, it is still a good bet for Apple as they can use Tesla EV expertise.
To make the situation more difficult for Elon Musk to deal with, Morgan Stanley has quoted that in worst case scenario the shares of Tesla could fall as a low as $10. The primary reason the consulting firm has cited is the lukewarm response Tesla is receiving in the China market, where the company has recently started its operations.
Irwin disclosed that Apple’s is secretly working on its car project and that the company is building large “dry rooms” in California to do something related to automotive batteries. According to Irwin, those rooms are designed to handle the environmental containment required for the production of lithium-ion batteries.
“My understanding is Apple wanted Elon Musk to step away, and that was a deal killer,” Irwin said in the email.
In 2014, The San Francisco Chronicle reported about the secret meeting held between Adrian Perica, Chief Of Mergers and Acquisitions – Apple Inc. (NASDAQ:AAPL), and Elon Musk. Also, it is rumoured that Tim cook himself was part of that meeting.
If Apple acquires Tesla Motors, this would be the largest acquisition the company has done ever and one of the biggest in the technology industry. Tesla’s current market cap is about $36 billion. The most Apple has ever paid is $3 billion to acquire Beats Electronics in 2014.
But the acquisition of Tesla by Apple is just a suggestion now. There is no indication from Apple that the acquisition of Tesla Motors is on cards.
Today Tesla’s would have been in a far better situation had it been acquired by Apple in 2014. On the other hand, Apple also needs new innovation or some new line of business to strengthen its market. Considering the whopping amount of cash reserve Apple have the deal puts both the tech behemoths in a win-win situation.
Undoubtedly, together they can create something the world has never witnessed. In 2016, we did a teardown analysis of Why Apple must acquire Tesla and make Elon Musk a CEO. As every cloud has a silver lining, let’s hope that Apple acquires Tesla only to reinvent the automotive industry and take us to a better future.