This past week, the press announced that Tesla has surpassed the market cap of Ford. Upstarts like Tesla often are seen as more valuable than companies with long-held traditions like Ford.
Frankly, I’m not sure that Tesla is, today, worth more than Ford. But, that’s what the stock market thinks. That valuation is due to future expectations. Investors see more upside in Tesla than in Ford.
Are the investors right? Only time will tell. Tesla has a lot of business execution challenges ahead.
This Tesla valuation news reminds of the time a few years ago when Dell decided to “go private” by means of buying the Dell stock of all the shareholders. Michael Dell wanted to buy Dell for about $13 billion. I believed at the time that Dell was worth more.
I recall Michael Dell working hard to downplay the value of Dell. It was as though he kept saying, “Oh, this old thing? It’s not worth that much.” While he struck a deal to go private, a court ultimately decided that the company had been undervalued and Dell owed the shareholders quite a few billion of additional money.
Back then, I knew Dell to be an exciting company with over 100,000 channel partners, sales in over 180 countries across the globe with solutions that satisfied not only consumers but large enterprises as well. Revenues were north of $60 billion at the time. “This old thing?” I don’t think so.
It was during this same timeframe that Facebook acquired WhatsApp for $19 billion–a staggering sum. While some analysts believed Facebook overpaid, others felt that it was undervalued. All the while, Dell is downplaying it’s worth at only $13 billion. Come on.
Facebook placed a big bet on WhatsApp; Tesla shareholders are placing a big bet as well.
I wish these companies and their shareholders great success.
Thought for the week:
“Ask yourself: Is what I’m about to do going to make people smile? If the answer is yes, then do it.” – Sir Richard Branson
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