Discover more from Learning by Proxy with Vivek Srinivasan
Why is Musk making a bid for Twitter?
With the direction of movement in the EV industry, the success of Tesla is not a foregone conclusion.
A meteor looks its best just before it is about to flame out.
Say you run two companies, to the employees of the first one that you founded your message is:
SpaceX is a company that has travelled from bankruptcy to bankruptcy on generous support from the Government of America. The going was so good when good friend Peter Theil had put Trump in power. Sigh!
And you are selling a substantial stake in your other company, that you appropriated from the founders, and not to mention pledging a huge stake in it to buy a social media company that has gone nowhere in 15 years; It is hard not to think, what the hell is going on?
Elon Musk has been walking on the edge of a Sword for the last decade. Somehow he has escaped at each step. Even the SEC which should have ideally barred him from trading completely, let him off with nothing more than a slap on the wrist. He seems to get away with the most egregious crimes.
He is the richest man in the world. But if one company is about to go bankrupt, where is the wealth? His entire net worth is tied up with Tesla. Tesla is valued at over $900 billion.
Why would Elon Musk want to sell shares in his crown jewel?
I had written a post on Fuel last year. The kind of hydrogen capacity that is in the making is huge!
As the world realises that the days of coal/oil are numbered, there is an increasing push toward renewable energy. The trouble with renewables is supply. The sun is not out throughout the day, the wind will not blow when you want it to, and in the winters rivers will not flow with the same force as during the summers.
This implies that there is a need to capture as much of that energy as we can when it is available and use it later. Batteries, well... We are going to run out of Lithium by the end of this decade. While we can hope that Elon will mine it on the moon, there are better alternatives.
Ultimately fuel is a store of energy.
In the olden days, one way of storing human energy was by raising water to an altitude, you could then convert the potential energy of the water into kinetic energy and have energy at your disposal when you wanted. Today, it is possible for us to store energy by splitting water into Hydrogen and Oxygen. The Hydrogen can then be converted into energy through a fuel cell or by combustion.
And at the beginning of this year, I had written about the paradigm-changing transportation that is coming our way.
In the 1960s the world was first introduced to the Jetsons and a picture of the future. The flying car was the only mode of transportation that the Jetsons used. The 60s was a time of the jet age, a time when man was reaching into space and a time when man landed on the moon.
That future was swamped by the internet and a lot of innovation over the past 20 years have been virtual rather than real.
The balance is shifting. All those kids who sat around watching Jetsons in the 1980s (during its re-run) are now adults. Many of them are working towards making that future real.
At the beginning, of the 20th century, both the car and the plane were considered marvellous toys for the rich. In 1900 the US-built 4192 cars. Today, that would be the sales clocked by a single brand in a single month. The first plane was booked in 1906. By the end of the century, there were billions of cars on the road and hundreds of thousands of planes in the sky.
Many of us have lived through the internet transition which started in the mid-90s. The world today is barely recognisable. Gear up for another transition.
Also, if this takes off, wait for Elon Musk to take to Twitter and tell you all about how unsafe flying cars are.
Instead of whining on Twitter, he is buying Twitter. Twitter is a rage machine and it is the best way to manipulate people and governments.
So why is his own belief wavering now?
If you read the article cited above, Slovenia became the first country to allow flying cars to fly, legally. On the one hand, the fuel battle seems to take a turn.
A prototype fuel-cell plane has made the first ever trip between two commercial airports by a hydrogen-powered electric aircraft, according to German technology developer H2FLY.
The Stuttgart-based company has announced that its HY4 demonstrator plane flew 124km from Stuttgart to Freidrichshafen airport on 12 April, with the four-seat aircraft then reaching a record high altitude for 7,230ft (2.2km) the following day.
“This is a remarkable achievement for H2FLY, as no other hydrogen-powered passenger aircraft has flown between two commercial airports to date,” said chief executive Josef Kallo. “We are also thrilled to have set what we believe to be a new world record by reaching an altitude of over 7,000ft with our HY4 aircraft.”
“In just a few years, hydrogen-electric aircraft will be able to transport 40 passengers over distances of up to 2,000km,” the company says. “H2FLY successfully closed a major funding round in April 2021, securing its growth and enabling the company to begin scaling its technology and solving the related challenges.”
And on the other hand, the road/tunnel battle also seems to be taking a turn.
Air One, the world’s first air station for electric vertical take-off and landing (eVTOL) aircraft, will open tomorrow in Coventry, UK. Urban-Air Port, a British company dedicated to the development of this type of ground-based infrastructure, announced that this is the beginning of a new era of zero-emission urban transport.
Coventry was selected for its geographical location and its history of automotive and aerospace innovation. For the company, it «represents the ideal place to showcase the future of mobility».
Airports meant for eVTOL are much simpler infrastructure projects compared to building miles of underground tunnels. 2022 promises to be the year of the flying cars.
If you think back to when the iPhone was launched, the technologies that they had used in the phone seemed out of the world. 5 years later all those supply chains had been commoditised. Today, anybody and their grandmother willing to make a visit to China can get a smartphone company started. The same is happening to the entire EV supply chain.
It takes some starting capital to launch your own brand of phone perhaps between $10-50 Million. For a $100 Million you can get an EV company, with a factory and all, off the ground. Given all the easy money that has been rolling across economies over the past 2 years, there is a glut of launches coming. This is going to only ensure that we run out of Lithium faster pushing many more towards Hydrogen Fuel Cell Technology.
So after lobbying every government in the world to take the foolish step of pursuing an Electric Vehicle à la lithium battery; he is getting off the boat. He is not dumping all the shares in one fell swoop because that would tank the share market but he is moving the money into an asset that is far more sturdy.
Tesla is valued at a Price to Earnings (PE) ratio of 180, at that price the company is valued at an insane $900 Billion. If it was to be more fairly valued at a PE of 18, it would be worth $90 Billion. A lot of the value of the company is derived from the fact that Elon Musk is holding on to the shares. He cannot sell at will.
This distraction acts as a perfect foil to capitalise himself. Whether he buys Twitter or not is immaterial. He would have sold shares for “free speech”. At least he would not go back to broke if the company went to hell.