Tesla shares had an unbelievable week last week. Stock equivalent to the electric-car company’s market value changed hands in less than three days. That takes six months or so for most companies, but the wild ride isn’t over.
Tesla stock moved again Monday. This time, it hit $819.99 in Monday trading, up more than 9%. Tesla closed the day up 3.1% to $771.28 a share.
The reason appears to be far-fetched M&A speculation. Someone had an idea about who might have interest in taking over Elon Musk’s company. Forbes “Great Speculations” contributor group posted an article Monday arguing that Google’s parent, Alphabet (ticker: GOOGL), could buy Tesla (TSLA).
Before investors dismiss the idea out of hand, consider that Google expressed interest in buying Tesla long ago, although the price to be paid was more like $5 billion. Tesla’s market value now exceeds $130 billion.
Read More: There’s a World of Dividend Stocks Out There. And They Pay More Than U.S. Companies.
Alphabet’s Waymo develops technology for autonomously driven cars. Tesla, one day, hopes to have its own fleet of autonomous taxis driving passengers in used Tesla vehicles. There are some factors that appear to make sense.
The price paid, according to the speculation, would be $1,500 a share, or $270 billion. And the value ultimately realized by Google could be $1.5 trillion. That’s more than 10 times higher than today’s valuation and, in theory, makes Tesla the most valuable publicly traded company in America.
One and a half trillion dollars works out to more than $8,000 a share. That’s a lot.
This is just more fun with numbers. But after the week Tesla stock just had, every piece of speculation becomes news. Shares started last week around $650 and hit almost $970 at one point before dropping to “only” $750 a share.
Calling $8,000 pure speculation isn’t a dig at Tesla. The company has had a string of operation and financial successes lately. Tesla posted better-than-expected earnings and cash flow in both of the past two quarters. The company also managed to ship Model 3 sedans from its Shanghai plant less than a year after starting construction.
Still, companies worth more than $100 billion don’t usually get taken over for 100% premiums. Of course, anything is possible. More than half of Alphabet voting stock is controlled by Larry Page and Sergey Brin. Class B Alphabet shares have 10 votes to one vote for Class A stock; Brin and Page hold more than 84% of the Class B stock. That gives the pair, in some respects, carte blanche to do as they please.
But come on. “Anything is possible,” after all, isn’t a tried and true investment strategy.
Tesla stock is up almost 85% year to date, crushing the gains of the S&P 500 or Dow Jones Industrial Average over that span.
Write to Al Root at allen.root@dowjones.com
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