Soon it could only be half as much: Just over half a year ago, Tesla shares reached their highest closing price ever at $ 1229.91, at that time carried by enthusiasm about the announcement that the purchase of 100,000 Model 3 through the rental Hertz many more people would get in touch with the company’s electric cars. Since then, however, things have been looking less and less rosy for Tesla on the stock exchange. After another 6.4 percent loss on Friday, the stock closed this week at just $663.90 — and calls for a buyback for support are beginning to grow.
Tesla buyback to support course
Probably the first came this week from billionaire Leo Koguan (see photo above), who was confirmed in September 2021 as the largest private Tesla shareholder and has since made additional purchases according to his own statements. Tesla had free cash flow of $2.3 billion in the first quarter of this year, $8 billion for all of 2022 and $17 billion for 2023 after investments, he wrote on Twitter. So the company has enough cash reserves to repurchase its own stock for $5 billion this year and $10 billion the next.
That’s what many large technology companies do when they don’t really know how to invest their billion-dollar reserves with sufficiently high prospects of returns. Overall, according to CNBC, shares for $850 billion were bought back last year, led by Apple. Google parent Alphabet announced another $70 billion buyback in April. Such actions reduce the number of shares into which a company’s total profits are divided, leaving more for each one. If nothing else changes, this allows prices to rise.
@KoguanLeo is 100% correct. With $TSLA FCF of $10B in 2022 and $20B in 2023 — after CapExp for new gigafactories of $7B in 2022 and $8B in 2023 — stock buybacks of $5B in 2022 and $10B in 2023 are far superior to letting cash build on the balance sheet at 2-3% ROI. @MartinViecha https://t.co/X83FV0h6Ks pic.twitter.com/wybtxu4wjI
— Gary Black (@garyblack00) May 19, 2022
And Koguan would also like that from Tesla, as he confirmed in further Twitter messages. He received support for the proposal from fund manager Gary Black, who, according to his own reports, is also investing heavily in the stock. Even after investing billions this year and next, Tesla will probably still have more than enough reserves, he calculated. A buyback in the amount proposed by Koguan is certainly better than leaving money in an account at 2-3 percent interest.
Musk assures full concentration
In view of the sensitive price losses, especially in the last few days, other Tesla shareholders spoke out in favor of it on Twitter. However, analyst Pierre Ferragu was against it: a buyback would not have a significant impact on the price and would do nothing for the mission, he explained. Tesla should rather use the money to ensure more installations of renewable electricity generation and storage. This, in turn, was countered by saying that the company is currently not being slowed down by insufficient investments, but by the availability of raw materials and skilled workers.
Tesla boss Elon Musk and his IR boss, who was addressed directly by Koguan, did not initially react to his suggestion. But on Thursday, according to another analyst, the CEO at least made it clear that he cares about the current needs of shareholders. He spends less than 5 percent of his time trying to take over Twitter, commenting on a meme that shows him distracted. At Tesla, on the other hand, he thinks “24/7”. Daniel Ives of Wedbush Securities took this as a good signal that could calm the market. However, it didn’t work on Friday.
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