Tesla (TSLA) shares were mixed Thursday following a report that German auto giant Volkswagen (VOW3.DE) was interested in acquiring a stake in the electric automaker. Volkswagen has since denied the media report and said it is not interested, but it has brought to light questions over who could, or should buy Elon Musk’s company.
“I think a ton of companies would love to get Tesla's technology, but it's really expensive.” HyperChange founder and CEO, Galileo Russell, told Yahoo Finance’s On the Move.
“At $40 billion, you have to pay $50 or $60 billion. I mean, that's too big for any car company to really buy unless it's a merger of equals. And frankly, the upside of Tesla disrupting this and their autonomous vehicle software, like, I don't want this company to sell, I don't think Elon Musk wants this company to sell at this price, because it's so, so undervalued,” said Russell, who started following the company eight years ago. “So as a shareholder, I really hope that doesn't happen.”
So who could buy Tesla? Russell said look outside the auto sector.
“Do I think it's a really smart move for Apple (AAPL) or Google (GOOGL) or Amazon (AMZN) to write a huge check, and make this happen, and acquire Tesla's tech? Yes… The reason why these tech companies are more likely suitors than the car companies is because the truth of the matter is it's a smartphone on wheels,” he said referring to Tesla’s battery technology. “This is way more about software than it is about building a car. And those are core competencies that these tech companies have, much better than auto companies.”
Betting on Tesla’s ‘next phase’
Tesla has been under pressure from investors this year, with shares plunging over 30%. Many have questioned the company’s future under Musk following several questionable tweets and high profile executive departures.
“Elon Musk, as much as he gets a bad rep, is actually a huge reason they can recruit industry-leading engineering and software talent which is actually building these batteries,” said Russell. “Like a study just came out saying engineering students want to work, number one, at SpaceX, number two at Tesla. And so I think that talent factor is a huge, huge competitive moat that leads to the tech being better.“
Despite all the criticism, Russell remains bullish on the company. Tesla “delivered 2,000 Model S a year. This year, they're on track to deliver 360,000 to 400,000 cars. So, the progress has been unbelievable. And there's a reason why this is my biggest investment in my portfolio and I've been buying as much stock as I can at these prices,” said Russell, adding that Tesla has been way ahead in what he believes is a shift in transportation to electric and autonomous.
“Electric is already in the bag, Tesla led that, and everyone is copying them...,” he said. “Autonomy is actually in the bag for Tesla as well and that narrative will play out over the next 12 months and will totally change how transportation works in cities. That is a massive opportunity that will let this company potentially get 10-, 20-, 30X bigger. That is the exciting next phase of the company that I’m betting on.”
Kenneth Underwood is a senior producer for Yahoo Finance. Follow him on Twitter@TheKennyU.