SIMON BROWN: I’m chatting now with Viv Govender, he is, of course, a portfolio manager at Rand Swiss. Viv, good morning. I appreciate your time. Later today, I think after the close in the US, [we’ll get] Tesla results. I’m reminded of a conversation we had around Tesla, and I’m trying to remember when it was. I think it was in August or September. At that point, split-adjusted it was (around) $300 a share and, in fact, looking at the chart, it goes back earlier. It was early August. It’s now rallied to $880-odd dollars. It is on a price/earnings of crazy numbers.
You made the argument when we spoke last time that this has been valued more like a tech stock, and certainly, that is what the pricing is telling us. But this stock is pricing in a bright future, plus a lot more.
VIV GOVENDER: Yes. If you’ve valued Tesla as a car company, it’s impossible to value it at this level. There’s just no way to get a valuation this high. If it was the world’s best, biggest car company, if you look at other car companies out there, the Toyotas, the Volkswagens, much, much larger companies, that do production in terms of sales, revenue, and so on, Tesla’s valuation is multiples what theirs are. And so the only way to get a valuation of this, for Tesla, is if you value it as a tech company, and if you focus on one particular aspect of it, I believe, which is the self-driving option.
If Tesla gets self-driving right, I think that is something that could justify this kind of price, because that is something that will actually change quite frankly, the way the world functions. So real estate, the whole economy will basically change if it really comes as a zero-cost to have you know, goods delivered, people delivered by a self-driving (car). So I think that is the only way you’d value Tesla as high as it is.
SIMON BROWN: And truthfully, Tesla is way ahead. Weimer’s doing their self-driving. Uber had a division, they’ve spun it out. But the difference here is that Tesla’s got, what, a couple of million vehicles on the road, and those are all kind of in a way beta testers for Tesla. So they are getting that mileage, they’re getting real-world testing, which is giving them a significant advantage over competitors.
VIV GOVENDER: Oh, yes. I do think that self-driving has the most grounded. Imagine if self-driving becomes viable, the first company that does it and proves that it’s safe – are you going to buy the second company? Why would you risk your life on (a company that is on) the way to getting there, when there’s something out there that actually works at the moment?
So, yes, if Tesla’s self-driving becomes a technology that they can market to the rest of the world, it’s not just going to be cars, there’ll be little scooters delivering your pizza to you.
There’ll be little self-driving vehicles weighing may be less than a hundred kilograms taking your groceries to your door. It becomes a very different world like I said. And I do think we will be seeing a first-mover advantage. That’s going to be quite large if Tesla gets it right.
SIMON BROWN: You said that to me before. There is no chance I’m getting into sort of second-place self-driving. I want the best self-driving.
I’m not sure if you’ve… kept up with the Reddit, the Wall Street bets, sort of sub-Reddit on there. GameStop has been their most recent sort of target. Last Tuesday stock was trading at $20. Last night it closed at almost $150. It’s almost like this group of Redditors are kind of taking on Wall Street; they pick a stock and they go crazy with it. And so far the Redditors are seemingly winning.
VIV GOVENDER: Look, this is something that has been done before. If you look at the SoftBank situation a little while ago, if you look at the market fundamentals – not the stock fundamentals, but the market fundamentals – you often find ways to get an analysis of [something], especially if you go with some kind of size into the market, something that’s basically, for instance, heavily shorted, and you go with enough buyers in there, you are going to cause a short squeeze, a short squeeze that will force the underlying institutional buyer – shorter, rather – to basically have to buy it back from you at a very, very high price. And you could force these out. I think you’ve seen that kind of stuff in the past as well.
This is the first time I think that it’s really been done by a cognative number of smaller individual traders. You have seen larger institutional guys as I said, Soft Bank and so on, mess around with this kind of stuff in the past. And so it’s almost like a case of being eaten by a shark, or being eaten by a bunch of piranhas. It’s still the same situation.
But, that being said, this is a reasonably dangerous aspect as well, because you’ve got to get the pricing right. Eventually, you are not looking at the underlying fundamentals of the… stock…. If you look at the underlying fundamentals of the market, the supply and demand, the short stock availability and so forth, I do think that, like I said, it has been done in the past by large institutions. It’s just that we are seeing now some of the smaller guys out there, the retail traders, being able to coordinate via a mechanism like Reddit, and they’re also getting the same kind of results and the same kind of profits.
SIMON BROWN: And that happened last year with Hertz, with Kodak, but I think this was the more organised, perhaps. We’ll leave it there. Viv Govender, portfolio manager at Rand Swiss, I appreciate your early morning time, sir.