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Holy smokers well if you didn’t hear the big news today it’s in regards to tesla tesla acquires ultracapacitor and battery manufacturer for over 200 million dollars to be exact around two hundred eighteen million dollars a lot of people were wondering like should tesla be spending this much money off that balance sheet while they’re actually not spending cash to
Acquire this company and actually issuing shares so i want to talk about this maxwell company and kind of explain what their business model is and they explain a little bit about their background and then i want to give you the two core reasons i believe elon musk i went ahead and required this company i believe there are two very strategic reasons all right
Now first off this maxwell company congrats to anybody that own this stock it is up around fifty percent to take guys like if you all happen to own that stock like congrats to you because you are probably doing very very good on those shares needless to say the acquisition is supposed to close around four dollars and seventy five cents so it’s possible if you
Want to buy that stock and maybe get a little bigger gain you could but i’m not sure it’s worth the risk just because if it happened to not go through obviously that is something that could hurt you there as far as if we look at their income statement it’s a company that pretty consistently brings in around roughly thirty million dollars a quarter they bring in
A pretty consistent gross profit of around six to seven million dollars per quarter but if you look at their net income that’s where it’s really dragged down it’s a company that loses eight to nine million dollars in net income pretty much every single quarter quarter inning quarter out sometimes there are certain companies that may might have amazing technology
They might have really cool stuff and products they’re working on but there’s so much more that goes into running a business successfully actually making money on that bottom line other than just technology i’ve seen time and time again where a company will have really cool technology like super futuristic stuff they’re working on or whatever but they cannot make
Money because they just aren’t at a scalable level where they can they can actually use that technology market it right get in front of the right customers execute on everything across the board if they just end up failing because they might have cool tech but there’s so much more that goes into a running a business so sometimes it makes sense for a company like
This to say we’re just going to sell out to a bigger company who can use this tech and go ahead and you know get it out there to as many people as possible and build the business that way instead of just continue to lose money and never getting it to that level okay the maxwell had been looking for someone to buy them for quite a while all right now there are some
Mega trends that this company was trying to execute on two of the trends i don’t know where they are almost like the same thing okay so renewable power generation in the grid obviously battery packs and batteries in general that’s a huge trend that’s going in the future you’re actually using energy from either solar or using energy from wind products or a lot of
Different things right and then storing that in batteries and you actually using that on the grid and then also obviously you know the rapid growth in battery electric vehicles as a major growth vector for any battery companies out there especially ones that are very focused on it if we look at this they had around a 1.35 billion dollar opportunity in energy storage
And then obviously batteries in general for electric vehicles that’s a multi-billion dollar opportunity but a company like maxwell it was so small and so niche that also although they might have really good technology it’s really hard to scale up and you know take advantage of those type of opportunities so you could have said well they should just save you know
As a public company and maybe try to make it yes sometimes you try to make it and you might end up failing as a company like this company was kind of doing like you they couldn’t make money on the bottom line it just wasn’t possible they needed to tuck in with somebody else okay and if you look here they had a big design when recently with volvo that was a huge
Opportunity for them they’re also talking about multiple large-scale design winds on the horizon so that is very exciting things of course you know who knows if they would actually execute it on those or not but needless to say electric vehicles was a huge opportunity for their batteries they’re talking about 15 million to 30 million electric vehicles forecast
By 2030 i think that number is probably gonna be very accurate if we look at lithium-ion battery capacity by 2030 you know it’s just going up exponentially the patented breakthrough dry battery electrode technology to capitalize on the coming mega trend in the future so the question is there’s got to be you know some reasons on why elon musk will go ahead and you
Know make an acquisition like this although he’s not spending you know tesla’s cash on this he’s basically giving away tesla stock to make this acquisition for over 200 million dollars and a lot has been speculated out there around this why the you know they would go ahead and make an acquisition like this in my opinion there are two core reasons the first one is
A round cost i think this company will help tough over time bring the cost of batteries down tesla’s very very focused on bringing that cost of batteries down and the reason is this is such a big thing to see who actually wins the electric future as far as electric cars but not just that to make electric cars to a point where you can start selling $20,000 $30,000
Electric vehicles and actually make money on those actually make a profit no different than car makers right now can sell a $20,000 iess vehicle or a $30,000 iced vehicle and still make a decent profit on that the electric guys are saying hey man well you know if we’re gonna get to the scale where everybody has electric cars out there around the world over the next
Decade or two we’re gonna have to make it where electric cars can be sold in that $20,000 and $30,000 range and we can’t lose money on that we still need to make money at the end of the day just like the ice guys can sell a $20,000 a $30,000 vehicle and actually make a profit on that and to explain how big the difference in cost can be with something like this let’s
Say there’s just a thousand dollar difference between what one company uses for battery technology versus another company okay let’s say that company moves around a million units per year which by the way i think tests a long term will be moving way more than a million units a year but let’s say just a million units a year and the difference is a thousand dollars
That’s a billion dollar difference that goes straight to the bottom line okay we’re talking about a billion dollar difference that’s basically going straight to the bottom line and we’re talking about a massive cost advantage now $1,000 can be you know just a slight difference in my opinion there could end up being three thousand to five thousand dollar differences
Between you know different car companies that are using battery technology we’re talking about massive differences in what you can actually you know basically get from customers to actually pay for that car and how much actually can go down to that net income line it can be a major major difference so in my opinion one of the big reasons elon went ahead and made
This decision was you know we got to bring the cost of batteries even lower and lower because we’re talking about so much more money can go to that bottom line which that money can go ahead and be used on research and development to make even cheaper and cheaper batteries in the future and just you know make better and better cars use that money from marketing
Anything across the board that’s a big thing okay that’s reason number one i think that’s a big thing reason number two is around ios and android now how does this make any sense okay well essentially for smartphones right there are two main operating systems at almost every single person in the world uses one of two operating systems they either have iphones and
They use ios or they have you know an android phone of some kind could have been made by huawei or samsung or xiaomi or whoever okay but basically almost every single person that has a smartphone is using one of those operating systems i think tesla’s in a position here where they can say hey you know what we can be ios and android how do we go ahead and do this
Well we have tesla vehicles which are proprietary vehicles that you know are is everything that we basically manufacture goes into that right and that’s our vehicle right but if somebody doesn’t want to buy a tesla what if they’re still using our batteries at the end of the day what if they’re buying from any of the other car brands out there okay what if they want
A chevy or an acura or bmw and audi or evolve our honda or any of these different vehicles they’re all going to be electrified in the future right what if tesla can be that one that’s actually manufacturing all the batteries that go into those cars so essentially tesla would benefit not only by if you actually buy a tesla car but if you buy any car because they
Got the cheapest batteries the best batteries the most reliable batteries and in the long run every car manufacturer could end up using tesla batteries if they win that game because there could be such a cost advantage and such a branding advantage to use tesla batteries this is something that is very big it would put tests on a position where they’re literally
Like you like everybody’s you know if no matter what car you buy you probably got a tesla product in there as in the test of batteries okay that is a very big thing imagine the cash flow tesla could have if they’re selling you know a million to two million tesla’s a year which i think is very doable within five to ten years and then also every single other car out
There is being sold has tesla batteries or almost every single car imagine the cash flow the tesla could be generating at that time this is how you get tesla to a you know one hundred billion dollar company a five hundred billion dollar company you know a three quarters of a trillion dollar company by getting to that type of scale okay now real quick here i just
Showed you that chart in my opinion with by 2030 three fourths of those car brands i just showed you while she’d be out of business okay they’ll be non-existent over the next decade there’s gonna be mass consolidation in my opinion of the car brands you’re going to get down to just a few big brands out there that pretty everybody owns and if you’re looking at
This at even a longer-term perspective i think this probably only only be like three or four big car brands out there and everything else is gonna be non-existent kind of like nowadays if you look at smart phones there are there are two big dogs in the game there’s apple and they’re samsung and then there’s kind of like everybody else right this huawei and xiaomi
There’s a couple of you know a few smaller players but essentially most people out there either have an iphone or they have a galaxy device of some kind of samsung right and so i think that’s gonna end up happening with cars over time and this is just a massive opportunity for tesla right now let’s go on to my favorite app and see what they think about this tesla
Acquisition okay oh good fit with tesla another money losing company oh man that doesn’t surprise me that somebody would take that as a negative the way i look at this as a tesla shareholder i definitely approve of this acquisition especially if it works out over long-term which you know i think it will work out over the long term but if tesla was requiring this
Company with cash and not with stock i would say no no no it’s not worth it at this particular time because tesla has a lot of things going for it it’s probably not to make that 920 million dollar payment and if they if they had a part with two hundred plus million dollars off the balance sheet i say no no no that’s not true that right now now’s not the time but
The fact that they can make an acquisition with like this with just stock in my opinion is full go is totally worth it in the long run to take a risk out there to acquire a company that could be a potential game-changer as far as cost goes and as far as putting tesla helping put in tesla in a position where they are the dominant battery manufacturer out there over
Let’s say the next 10 to 20 years that is such a big opportunity that i don’t think it should be you know shunned by anybody out there so i’m all for it i think it’s totally worth it i hope they execute it very well and they bring that company in successfully and they make it into a very successful company that can help tesla expand over time i think that’s big
Guys so that’s my opinion on the whole deal make sure you follow me on instagram if you have not already thank you for watching have a great day
Transcribed from video
Elon Musk Spends $218,000,000 on Battery Company for Tesla By Financial Education