Electric car maker Tesla, like many other technology and growth stocks, has been hit hard by the stock market in recent months.
As the world has greeted the Corona pandemic more and more from a distance, investors have increasingly ignored stocks that have flown higher during lockdowns over the past two years. For example, the high-tech Nasdaq index on the New York Stock Exchange is down more than 20 percent from its highest level last year, led by the sharp declines of giants such as Amazon and the owner of Meta Facebook and Apple.
Tesla did not run away either. The Elon Musk-led company reached a peak of $1,229 per share last fall, but the stake has fallen more than 40 percent in the following months. So far this year, the drop has been 41 percent, and on Thursday the stock was trading around $704.
The drop in prices has led the Indonesian-born billionaire nicknamed “Tesla’s bull”, Liu Koguan, to now invite the company to announce a massive share buyback program. He claims to be the third largest non-institutional investor in Tesla.
Five billion this year and ten next year
According to Forbes, Leo Koguan has a fortune of more than five billion dollars, and he made his fortune in the IT industry. He was born in Indonesia and has a US passport. It is not found by name on the list of Tesla shareholders, but it may be “hidden” behind shares officially owned by banks or other institutions.
In a Twitter message earlier this week, Martin Vicha urged Tesla’s director of investor relations to announce a $15 billion total private equity buyback program.
Koguan believes Tesla should use the money from its free cash flow to buy back its stock for $5 billion this year, and $10 billion next year. He argues that this should not affect the $18 billion cash balance that Tesla now has.
In a later statement, Koguan wrote that Tesla’s actual free cash flow this year was $2.2 billion in the first quarter, a figure he estimates will rise to $8 billion by 2022. So he thinks the company should be able to afford the buyback. on the market for a total of $15 billion.
Private equity is often bought back by companies if they believe the share is undervalued and want to increase demand. When a company buys back shares in the market, it reduces the total number of shares in circulation, which in turn can increase value and profits.
Buybacks can also be seen as a way for a company to “pay off” its shareholders.
Record number of buybacks last year
In a Twitter thread, Tesla’s Martin Viecha offered no answer as to what he thinks about Koguan’s proposal. The company also did not respond to inquiries received from CNBCwho also mentioned the case.
However, according to the US economy website, the past year was marked by one A new record in terms of companies repurchasing their shares.
Companies that are part of the S&P 500 index bought back their shares for a total of $850 billion in 2021, a new record. Topping the list is Apple, followed by Meta, which owns Amazon and Facebook.
However, in recent weeks Musk, the Tesla boss, has received far more attention from his Twitter acquisition than from the electric car maker. Earlier this week I did Musk clearly wants a proper review of the number of spam users on the platform, and announced that the agreement was “paused until further notice”.
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