Over the years, speculation about Apple (NASDAQ: AAPL) gaining adze (NASDAQ: TSLA) rotated periodically. Perhaps the most notable example was when reports surfaced in 2014 that Tesla CEO Elon Musk met with Apple’s head of mergers and acquisitions (M&A), Adrian Perica. It also happens to be just the time when Apple launched Project Titan, its electric vehicle program that has seen investor interest renewed following a recent Reuters report that the Mac manufacturer is aiming for a launch by 2024 or 2025.
It seems that Musk has really tried to make a sale to Apple, but it was much more recent.
Tesla kicked off Model 3 deliveries at an event in mid-2017. Image source: Tesla.
Tim Cook “Refuses to Meet”
The source of the news this time is not a speculative media report, but rather Musk himself. The eccentric billionaire shared the anecdote directly on social media, saying he tried to contact Apple CEO Tim Cook as Tesla struggled to produce the Model 3. Musk consistently described that period as “hell.” production ”, as Tesla enters the main segment of the car market.
In the darkest days of the Model 3 program, we contacted Tim Cook to discuss the possibility of Apple purchasing Tesla (for 1/10 of our current value). He refused to take the meeting.
– Elon Musk (@elonmusk) December 22, 2020
For context, Tesla began production of the Model 3 in mid-2017, but faced a lot of operational challenges in terms of production as well as deliveries. By the end of 2018, the electric car maker had solved many of the production problems, but then progressed to “hell delivery logistics,” according to Musk. The latter troublesome stage lasted until about mid-2019.
It is very likely that the “darkest days” that Musk refers to were between mid-2017 and the end of 2018, a period in which Tesla’s notoriously volatile stock was largely traded. For a year and a half, the company’s market capitalization fluctuated around $ 60 billion, which is about 1/10 of Tesla’s current market capital of over $ 600 billion.
TSLA market capacity data by YCharts.
The revelation comes after Musk revealed last month that Tesla went “about a month” from bankruptcy during the Model 3 ramp. The story also recalls when Musk tried to sell Tesla to him. Alphabet Google subsidiary in 2013, while the company was trying to increase production of the Model S, as Musk is a personal friend of Google co-founders Larry Page and Sergey Brin.
In a strange parallel, Tesla’s market capitalization was only $ 6 billion during this period – about 1/10 of Tesla’s valuation during the Apple episode. Twice, Musk sought to buy in difficult times, managed to survive, and then saw Tesla’s valuation rise tenfold. Don’t expect it to happen again, though, as another ten-fold jump from here would equate to a $ 6 trillion market cap.
Tesla has finally managed to stop the scaling up of Model 3 production and deliveries.
Data source: Tesla. Diagram by author.
As Apple pays with Project Titan, production will be one of the biggest challenges. Many experts have long expected the technology giant to use its long-term strategy to outsource production to contract manufacturers, even though this practice is less common in the automotive industry than in consumer electronics.
Too expensive then and now
Given Apple’s penchant for small purchases, as opposed to large ones, it should come as no surprise that Cook was not interested in a $ 60 billion acquisition. This would be 20 times higher than the largest acquisition to date (Beats for $ 3 billion in 2014).
This is especially true when you recognize that Tesla was trading at a significant premium to old carmakers, a valuation discrepancy that has now reached comic proportions.
TSLA PS report data by YCharts.
At the risk of stating the obvious, it is inconceivable that Apple would even flirt with the idea of buying Tesla today for over $ 600 billion. As fun as it is to imagine an Apple-Tesla merger, investors should let the dream die.