Today's Topics
3 charts today exploring:
- How Tesla is now the world's most valuable car company.
- How Edward Colston became the most searched for Briton on Wikipedia for a few days.
- How retail investors pumped the price of Hertz stock up almost 600%.
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This week, the total value of all Tesla shares briefly crossed $190bn, overtaking Toyota's (US listing) for the first first time ever – officially making it the world's most valuable auto manufacturer. Elon Musk did typical Elon things, tweeting the word "lol" and nothing else, as Tesla shares passed the milestone. Not a bad few weeks when you remember that Musk's other company launched 2 guys into space less than 2 weeks ago.
Nikola Tesla
Tesla is no longer the only electric company in town (town being the stock market). This week also saw electric truck company Nikola debut on the market, with a valuation now similar to Ford, despite Nikola never having sold a single truck, and with no plans for any revenue in 2020 (the trucks do look cool to be fair though).
As innovative as they may be, the founders of both electric auto companies seem to lack creativity in the naming department. Both decided to name their companies after Nikola Tesla, the inventor of alternating current. We think the next 2 electric car companies need to be called Thomas & Edison, so the war of the currents can be relived in the 21st century all over again.
Names aside, this latest rally brings into even sharper relief just how much faith investors are placing in Musk. Our newsletter from February, Tesla: Great Expectations, explored the relative valuations of Tesla and its peers. The valuation disparity was extreme then, and that was before Tesla's shares appreciated another 30%.
It's clear then that Tesla is no longer the scrappy upstart. The market is speaking loud and clear – it expects Tesla to win the race to electric and dominate the industry.
We don't doubt Tesla's innovation, but this is not an industry with fat margins and high returns on capital – and the competition are coming. Volkswagen for example, spent almost $16bn on research & development in 2018. Toyota spent $10bn. Ford spent $8bn. GM spent $7bn. Tesla managed to do a lot more with a lot less, with an R&D budget of ~$1.4bn.
Valuation and competition aside, one good rule of investing is just to never bet against a company with a great product and a hardcore fanbase. If Tesla doesn't fit that mould, no company does.
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Edward Colston is not a widely known historical figure. Yet, for a few days this week, he was by far the most read about Briton on Wikipedia, getting almost a million hits in one day after the slave trader's statue was torn down and thrown into Bristol harbour during a Black Lives Matters protest.
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The chart above is a silly one, comparing the Wikipedia hits of Edward Colston to 10 of the most famous Britons of all time, but the subject matter is serious. It's estimated that during Colston's involvement with the "Royal African Company", more than 82,000 men, women and children were enslaved and taken to the Americas, with more than one-quarter dying on the journey itself.
The fact that Colston's statue stood for more than 125 years has prompted debate across the UK about how to commemorate historical figures. The Wikipedia data is a good example about how a simple but powerful act, tearing down the statue of a horrible human being, can actually spark millions of us to learn about our history – however uncomfortable it may be.
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The rental car company Hertz is in a lot of pain right now. A few weeks back they filed for bankruptcy. That usually means lots of complicated legal proceedings as lawyers work out which of the company's investors get paid; debt holders vs. common equity vs. preferred equity etc. – pretty dull stuff.
Complicated situations like bankruptcies are not usually a popular investment for retail investors (non-professionals). So it was a surprise then when retail investors began frantically buying shares in Hertz through the popular investing app Robinhood.
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Dumb money? Or smart money?
Over a period of about 3 days, the number of Robinhood users that owned shares in Hertz jumped by about 90,000 in total (Robintrack data). That bizarre frenzy of buying activity sent the shares soaring – despite the company's fundamental situation remaining pretty much unchanged.
This is another one of those cases where the greater fool theory seems to apply. As long as you believe you can sell your shares to a "greater fool" in the future then buying something seemingly worthless isn't so crazy.
Even the company itself is trying to make the most of demand for its shares, filing a form on Thursday to try to issue another $1bn of equity to help cover its debts. We're not sure the Robinhood users have got a billion dollars to stump up, but it's worth a shot for Hertz.
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Data Snacks
1) Apple has launched a $100m "Racial Equality & Justice Initiative" aimed at increasing Apple's spending with black-owned partners across its supply chain.
2) According to fivethirtyeight Donald Trump's approval rating has dropped by more than 5 percentage points since early April, leaving him at just over 40% approval overall.
3) UK GDP has fallen 20% in the month of April, making it the largest drop since records began.
4) Twitter has deleted more than 170,000 accounts from its platform, that were "spreading geopolitical narratives favorable to the Communist Party of China".
5) Want all your news in a single email? Check out 1440 — they scour 100+ sources so you don't have to.**
6) A 7-year-old male panda escaped from a $24m brand new zoo in Denmark, climbing up a metal pole to do so. He was returned safely.
**This is a sponsored snack.
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