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Wednesday, February 21, 2024

George Soros Backs Elon Musk, Tesla

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Elon Musk has spoken a lot less about Tesla  (TSLA) – Get Free Report in recent months.

Very busy finalizing the acquisition of Twitter for $44 billion, and finding new sources of revenue for the platform, the billionaire has somewhat forgotten his jewel, which has caused a sharp drop of Tesla in the stock market.

Tesla’s stock price has lost 50% of its value this year, translating into a decline in market capitalization of approximately $532 billion.

Tesla’s big stock market drop was a boon for billionaire George Soros, who is, however, at the opposite side of the current ideology of Musk. Soros is a consistent donor to the Democrats, while Musk now campaigns for the Republicans and went on to call on voters to vote for the conservative candidates in the latest midterm elections, held on November 8.

But business is business. Following this principle, Soros, who acquired Tesla shares in the second quarter, has increased his stake.

Soros currently owns, through his firm Soros Fund Management (SFM), 89,647 Tesla shares, according to a regulatory filing. This stake is valued at $16.4 million at the current market price of $183.20.

Soros Doubles Down on Tesla

The legendary investor first acquired Tesla shares between April 1 and June 30. At the time, he held 29,883 shares. He, thus, tripled his position in three months.

Soros’ investment in Tesla is a sign of confidence in Musk’s strategy and especially in the fact that he is convinced that the “Techno King” will again make Tesla his priority.

An opinion shared by several eminent analysts. 

“To be sure, macro/competitive concerns are likely to remain an overhang with capacity rising, but as we’ve previously written, in a hard landing scenario Tesla’s long-term competitive position likely also improves and potentially further enhanced by (President Joe Biden’s inflation reduction act),” Citigroup analyst Itay Michaeli wrote in a recent note.

Morgan Stanley analyst Adam Jonas said that, while the ongoing distraction of CEO Elon Musk’s foray into Twitter will likely expose investors to added risks, the group remains on pace to grow sales by around 37% next year, generate $15 billion in free-cash-flow and consolidate its position as the word’s dominant EV player.

“We believe Tesla’s ‘gap-to-competition’ can potentially widen, particularly as EV prices pivot from inflationary to deflationary,” Jonas wrote. “With respect to the (inflation reduction act) we believe Tesla is by far the best positioned OEM in terms of potential eligibility for consumer tax and production credits.”

Solid Fundamentals

The fundamentals of the company are very solid. For the third quarter, Tesla posted adjusted earnings before interest, taxes, depreciation and amortization of almost $5 billion, up 55% year-over-year, while revenue jumped 56% to $21.5 billion. 

Tesla delivered 907,573 vehicles in the first nine months of 2022, up 45% year-over-year, and produced 927,910 cars, up nearly 49%. 

Stock market regulations require managers of funds with more than $100 million in U.S. equities to file a document, known as a 13F, within 45 days of the end of the quarter, to list their holdings in stocks that trade on U.S. exchanges.

The value of Soros’ U.S. equity portfolio rose 4.3% quarter-over-quarter to almost $5.9 billion. Soros Fund Management is a family office that manages public and private equity. 

“SFM invests globally in a wide range of strategies and asset classes, including public equities, fixed income, commodities, foreign exchange, alternative assets and private equity,” the firm says on its website.

Soros, whose net worth is estimated at $8.5 billion, up $1 billion, as of November 22, according to the Bloomberg Billionaires Index, is well known for pouring money into philanthropic efforts. Most of his firm’s assets belong to Open Society Foundations, which supports “people across the world who work for justice, equity and free expression.”

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