Apple CEO Tim Cook (Photo : REUTERS)
Angel investor and entrepreneur Jason Calacanis predicted on Feb. 14, Friday, that Apple would buy Tesla. But now, a new report says this prediction will never happen.
In his website, Calacanis predicted Apple will buy Tesla for $75 billion within the next 18 months. He has no shares in both companies and did not receive any insider information.
Evan Niu of USA Today was quick to refute this prediction saying, "Sorry, Calacanis, but it's not happening."
Niu says the transaction would simply involve too much money, whereas Apple is historically a small spender. Based on its past acquisitions, Apple has never bought anything "flashy," usually willing to shell out only about $500 million.
The Cupertino firm's biggest acquisition to date is Beats, which it bought for $2.6 billion in 2014.
Niu says that although Tesla is "a lot of things," it certainly is not a steal.
Niu believes Tesla would be a speculative investment for Apple. If the sale happened, Apple would be forced to record an "absurd" amount of goodwill and intangible assets.
Goodwill is an accounting principle that represents the value of a business not directly attributable to its assets and liabilities. Goodwill happens when a company acquires another for more than the estimate of the market value of the net assets, which are what remains after total liabilities are deducted from total assets.
Apple seems to be adopting a conservative acquisition strategy, according to Niu. This strategy aims to minimize the amount of goodwill and intangibles, which for Apple currently values $9 billion or 3.4 percent of total assets.
Contrast that figure to Microsoft, Google and Facebook with $29.2 billion or 16.7 percent, $20.2 billion or 15.4 percent and $21.9 billion or 54.5 percent, respectively, in terms of goodwill and intangibles.
Acquiring Tesla would mean Apple has turned its back on its conservative strategy, throwing decades of discipline out the window along the way, and expose the company and its shareholders to considerable risk, Niu explains.
Tesla is also very capital intensive because it directly manufactures its vehicles, whereas Apple prefers to keep a lean supply chain by contracting manufacturers. Aside from that, the two companies operate in completely different markets, further minimizing the potential for synergies.
