Tesla investor writes open letter to Elon Musk on keeping Tesla public
Tesla CEO Elon Musk will sabotage his own goals for the electric car maker if he takes it private, said ARK Invest CEO Cathie Wood, who predicted Tesla stock could reach $4,000 per share.
"By going private [Musk] would deprive Tesla of reaching his own priorities — mobility as a service, autonomous truck platoons, utility energy storage, even air passenger drones," Wood said Friday on CNBC's "Closing Bell." "He's got big plans, and he needs to scale these plans. We don't think that it will happen nearly as effectively in the private markets as in the public."
Tesla has battled widespread scrutiny, following Musk's Aug. 7 tweet that he was planning to take Tesla private and had "funding secured." The Securities and Exchange Commission served Tesla with a subpoena last week, as it looks into whether Musk violated securities laws by claiming he had funding for the maneuver. In addition, Musk himself has been criticized for erratic behavior. He confessed in an interview with The New York Times the toll of the "excruciating" year he has had leading Tesla, particularly when crunching to meet Model 3 production goals.
Through it all, Wood, who is CEO of innovation-focused investment service ARK Invest, has remained bullish. Known for making bold calls, the money manager first revealed her $4,000 per share call in February. On Wednesday, she published a letter to Musk and Tesla's board of directors, imploring them not to take the company private. She sees the company trading anywhere from $700 to $4,000 per share within five years if it remains public.
Tesla closed the day up 0.85 percent at $322.82 per share, having gained 5.67 percent on the week.
Central to Wood's argument that Tesla could trade as high as $4,000 per share is the idea that Tesla will orient itself away from the capital-intensive vehicle manufacturing business toward software. And that's where Tesla excels, she said.
"We think he's already way ahead of the game. He's got the data, he's got the chip that's three years ahead of Nvidia's chip … He's got batteries, which are three years ahead of any other company's batteries. And he's had the vision about autonomous taxi networks from the very beginning," Wood said on Friday.
Pierre Ferragu, head of technology infrastructure research at New Street Research, said, "Tesla will become one of the major premium car manufacturers, like Audi and Jaguar … within the next seven years," but its success will be from a purely go-to-market perspective, as Tesla has lower costs for marketing and distribution than other automakers.
"Maybe one day mobility-as-a-service will be a thing, but today there is nothing tangible there," he said.
New Street Research placed a 12-month price target of $530 on Tesla and sees it reaching $1,200 to $2,000 by 2025. It all hinges on production numbers.
"They have seven years to be able to produce 2.5 [million] to 3 million cars a year. As you can imagine, getting to the first couple hundred thousand is the most challenging part," he said. "Once they are at scale of BMW, they will be significantly more profitable than" BMW.
On production, Wood was bullish, saying Tesla will "iterate and iterate until they get it right, and then, they are going to be able to scale enormously when they get it right." But Wood's biggest hopes for the company concern software, and she worries those lofty mobility-as-a-service goals won't come to fruition if Tesla goes private.
Musk is "the kind of person you need, one with vision who ends up at times very frustrated with the short time horizon of public markets. But the public markets will reward him handsomely if he just sticks with it and starts performing with the production schedules," she said.