Apple-Tesla merger rumour excites investors

Apple-Tesla merger rumour excites investors

PUBLISHED: 6 HOURS 37 MINUTES AGO | UPDATE: 0 HOUR 0 MINUTES AGO

Rumours of a possible acquisition by Apple and expectations for a strong fourth quarter drove shares of Tesla Motors to $US203.70 on Tuesday, a 3 per cent gain and a new closing high for the electric car company.

It was the first time Tesla closed over $US200.

Investors were reacting to reports of a meeting between Elon Musk, Tesla’s chief executive and co-founder, and Apple’s Adrian Perica, a former Goldman Sachs investment banker who heads Apple’s mergers and acquisitions team, analysts said.

The meeting occurred in early 2013, but was reported by the San Francisco Chronicle this week, citing unnamed sources.

“There is a lot of pressure on Apple right now to find new markets to grow in,” said Craig Irwin, an analyst with Wedbush Securities.

But Apple taking a bite of Tesla seems unlikely, he said.

Tuesday’s closing stock price left Tesla with a market valuation of $US25 billion ($27.6 billion), about $US1.1 million for each of the 22,450 Model S cars it sold last year. The cars sell for $US70,000 to $US100,000, depending on options.

And that market valuation doesn’t include any premium Apple would have to toss in as part of an acquisition.

“Apple does not have a history of paying massive premiums,” Mr Irwin said.

Indeed, the computer and smartphone maker has never tossed around the billions to purchase companies in the same way that technology rivals Google and Microsoft have.

“I see this as highly improbable,” Mr Irwin said. “But it is one of the things that drives enthusiasm for the stock.”

If there was real evidence of any merger talks, Tesla’s stock would have closed much higher than a 3 per cent gain, said Thilo Koslowski, an analyst with Gartner.

Mr Koslowski said it should be no surprise that senior executives from Tesla and Apple have met. Tesla also has likely talked to Google, he said.

“It is a natural. These are technology companies in Silicon Valley,” he said. “They would talk together to see where there would be synergies.”

But the profit margins in the automotive business are so much lower than in consumer electronics that it is unlikely Apple would take a chance on a company such as Tesla.

“There could be a collaboration but not likely a takeover,” Mr Koslowski said.

Tesla was scheduled to announce its fourth-quarter financial results on Wednesday, and Mr Musk is likely to be asked about the Apple rumour on the teleconference that accompanies that car maker’s release.

So far both companies have declined to comment.

Tesla shares have been on a run. The stock has risen 46 per cent since hitting its low of the year of $US139.34 on January 13.

There is news expected from Tesla that could explain why Mr Musk was meeting with a senior Apple executive.

He said last month Tesla plans to build “the biggest battery plant in the world by far, and we’ll do it in partnership with some other companies”. The announcement is expected sometime this month.

Panasonic, already a Tesla shareholder and a big supplier of batteries for the car maker’s electric cars, is an expected partner. But Apple, which is also a big battery user, would also seem like a potential partner in such a venture.