With Tesla trading at lows not seen since August, the carmaker’s third-largest investor urged the company to prop up the market by announcing “immediately” plans for a historic stock buyback.
Singapore-based billionaire Leo KoGuan’s call for management to deploy cash lying around on its balance sheet is the clearest sign yet that the company’s owners are getting restless.
Never before has Tesla paid a cash dividend or bought back its shares, as it reinvested everything back into its business to finance further growth.
Returning cash to investors is typically a move much more mature companies would consider if they found few entrepreneurial opportunities where the return warranted the risk.
As recently as December 2020, Tesla was even raising fresh equity from investors at around $633, meaning many of those investors that once saw their investment double by last November are barely above water now.
“We Tesla bulls need more support,” KoGuan tweeted, pointing to the company’s prodigious cash reserves.
“Tesla can invest in (Full Self-Driving), bot and factories while buying back its undervalued stocks. Shock and wake up few braindead analysts to their senses.”
KoGuan suggested an amount of $5 billion this year and double that amount for 2023 — a total of $15bn, financed strictly by excess cash it cannot funnel back into growing the business that otherwise would earn pennies to the dollar in interest.
That way shareholders could be rewarded without endangering the strength of its balance sheet.
Tesla can afford it, too. The company generated a free cash flow of $5 billion in 2021, more than half of which came in the fourth quarter alone.
In the first three months of this year, it dipped sequentially to $2.2 billion, but this still amounted to a sizeable year-on-year gain.
This left cash and cash equivalents, such as money market funds, at $18 billion as of the end of March — more than enough to fund short-term needs, according to KoGuan.
Pennies to the dollar
Gary Black, another Tesla bull frustrated with the development in the price, chimed in to argue the Singaporean billionaire was “100% correct” in his estimation.
“Stock buybacks of $5 billion in 2022 and $10 billion in 2023 are far superior to letting cash build on the balance sheet at 2-3% return on investment,” he posted.
Shares in Tesla traded flat at $710 each in early trading on Thursday, the lowest level since late August, amid a broader lack of appetite for growth stocks and CEO Elon Musk’s risky acquisition plans for Twitter that currently overshadow sentiment.
KoGuan burst onto the Tesla scene last September when he stated he was the third largest shareholder, a claim later verified by Tesla’s head of investor relations, Martin Viecha.
According to a report in Bloomberg published the following month, bank records provided by KoGuan confirmed he owned 6.31 million shares as of late September along with options for a further 1.82 million at strike price well below present levels.
That makes him the third largest shareholder after Musk and Larry Ellison, founder of business software giant Oracle.
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