Time waits for no one. Fortunes change quickly. Look no further than the case of General Motors (tkr: GM) and Tesla (tkr: TSLA). This time last year GM sported a $55 billion market cap and some months later closed calendar 2019 with $137 billion of revenue. Plenty of time it would seem for GM to pursue its deliberate if not slow electric vehicle (“EV”), rollout strategy. Meanwhile, EV leader Tesla received less press than founder Elon Musk’s two private companies – SpaceX and The Boring Company.
GM was multiples larger than Tesla from a revenue standpoint and Tesla’s $49 billion market cap at the time was surely inflated – wasn’t it? A funny sequence of events then happened. Tesla posted solid operating results in the September quarter, announced its Blade Runner-esque Cybertruck in November 2019 which has been a huge success from a pre-orders standpoint, and TSLA shares rocketed from $248 in early September 2019 to a high of $901 on February 17th 2020. A nosebleed climb the likes of which I have never witnessed for a large cap company. TSLA shares today sit at $724.54, a market cap of $134 billion. GM’s valuation has come in from a year ago and sits at $43 billion – 32% of Tesla’s market cap.
How quickly fortunes change. Earlier this week GM touted its commitment to invest $20 billion over five years into EVs and autonomous vehicles. Tesla could issue 28 million new shares and raise $20 billion (not exactly in practice, but I use the simple arithmetic to illustrate how fortunes have changed). The $20 billion figure represents 47% of GM’s market cap and only 15% of Tesla’s. GM’s larger revenue base provides little advantage in the war against Tesla so long as Tesla sports a valuation that is 3x that of GM. GM mistakenly thought that time was on its side when in fact it got steamrolled by a Black Swan event.