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Tesla-Apple Merger – Never Gonna Happen

Apple (AAPL) and Tesla Motors (TSLA) reportedly were involved in merger talks — and the web is suddenly abuzz with the possibilities.

TSLA-stock-teslaBut while news of the Tesla-Apple merger talks has recently broken, the meeting itself is actually very old news; TSLA execs met with the M&A chief of AAPL almost a year ago.

Furthermore, there are many practical barriers to a Tesla merger with Apple — or anyone else, for that matter.

aapl-stock-apple-stockSo while a Tesla-Apple union might make for a sexy headline, investors hoping for a big deal that will give TSLA stock a big pop better sit back and relax.

Nobody is buying Tesla anytime soon.

AAPL-TSLA Buyout Barriers

A quick rundown of the practical barriers to an Apple merger include:

No existing car business: An obvious one, but a biggie. While Google (GOOG) is happy to mess around with self-driving cars and contact lenses that measure blood sugar, Apple is very much focused on its iPad and iPhone (and the software/apps that support them). There are theoretic synergies between mobile devices and cars, including streaming radio and GPS capability, but that’s a big leap to link the two businesses.

No existing manufacturing base: Even if Apple was interested in making cars, it’s important to remember that the company outsources production of its gadget line right now — and those suppliers are all in Asia. Tesla owns a factory in California. While it’s possible Apple might want to eventually get its hands dirty with manufacturing … why would you start with electric cars?

Elon Musk: A dynamic entrepreneur, Tesla CEO Elon Musk is not likely to sit around smiling as an Apple vice president. A guy who started private space flight company and an electric vehicle manufacturer just a few years apart isn’t window dressing and might bristle at being part of the Apple mothership. Sure, Musk co-founded PayPal and sold it to eBay (EBAY) … but it’s doubtful that he’d want to ride off into the sunset, as Tesla is very much in the ramp-up phase and needs a firm hand to keep it growing to its full potential.

TSLA Won’t Be Bought Out

On the surface, there are admittedly a few things Apple would find attractive in buying out Tesla — big-ticket items that could significantly move revenue, pleasing investors by actually deploying some of the roughly $140 billion in cash and investments AAPL currently sits on, and of course the big buzz from a deal.

But Tesla isn’t a good fit — and even if it was, it certainly isn’t a good fit at current valuations after soaring 500% from early 2013. If Apple wanted to make a move for Tesla, however unwise that would have been, it would have been better off bartering for TSLA last year before the run-up.

And for the record, if Apple isn’t going to buy Tesla, nobody is. At $25 billion, Tesla is hardly an easily digestible business. Only the likes of an Apple (AAPL) or a Microsoft (MSFT) could finance the deal, and TSLA isn’t a good fit for either.

As for traditional automakers … even if General Motors (GM) or Ford (F) could come up with the cash, they are well on their way to developing their own lines of plug-in electric vehicles — and after closing struggling auto lines like Pontiac and Mercury, respectively, why would they add another brand like Tesla back on top?

Tesla shareholders have a lot to like in TSLA stock — not just the gains, but also the potential.

But if you’re holding out for a buyout, don’t hold your breath.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP

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Comments
  • Jim5437532

    Tesla + Apple = Frapple {baked wrapped apple} = Crapple

    Both Apple and Tesla have spyware that make it possible for them to track and spy on customers user habits. Big brother type of stuff.

    How is it a “secret meeting” when there are dozens of articles posted on this “secret meeting” that seem more like advertising than news?

    Should companies that manufacture defective products that catch fire and EXPLODE, the best choice to start manufacturing medical devices?

    Tesla manufactures more excuses, then cars.

    There has been at least five significant Tesla related fires. Tesla has been dragging its feet on safety and the recall. lol

    The most recent Tesla garage fire to hit the news was in Toronto. The car supposedly wasn’t even plugged in, so the charging system isn’t likely to be a source. I’m hoping to hear reports from the fire departments investigation, because I don’t trust Tesla’s “fire investigations”, which seem more like coverups.

    There has been at least five Tesla fires. Two Teslas caught on fire after only running over road debris. One Tesla caught on fire and EXPLODED after being in an accident in Mexico. There was a Tesla fire in a California garage, that the Tesla charger connection was ruled as a possible source of the fire by the fire department. Recently there was a Tesla garage fire in Toronto, that so far I haven’t heard the fire department give a ruling. Arguably there has been scores, possibly hundreds of minor Tesla fires. There has been a plethora of Tesla charge connectors that have overheated, melted and burned. Though many Tesla shills will argue that they are not fire. Categorically and scientifically they are often classified as fire. Rapid oxidation or rapid decomposition is often classified as fire. Like the metaphor; where there is smoke, there is fire.

    A few months ago there was a Tesla related garage fire in California that the fire department ruled that the Tesla charging system was a possible source of the fire. The suspect portion of the Tesla charging system that the fire department in California determined was a possible source of the California garage fire, is also suspected in many other Tesla charger reported cases that Tesla charge connections have overheated, melted and burned. Tesla issued a software “fix”, however Tesla charge connectors have continued to overheat, melt and burn despite the so-called “fix”.

    The Tesla model S. still has defects that make it a fire hazard. Tesla charger connections are still overheating, melting and burning. Tesla batteries are poorly located and poorly protected.

    On 01-09-2014 Elon Musk said that replacement adapters that are part of the recall would be mailed out within two weeks. A month later Tesla customers have still not received the replacement adapters that are part of the Tesla model S. recall.

    Several people have been injured by faulty Tesla charge connectors. Tesla is big on making promises and hype, but short on delivery. Tesla needs to start making safety a top priority. Tesla needs to stop playing blame games and games with semantics. Tesla needs to stop lying. Tesla needs to be proactive instead of reactive. Tesla is being a follower of technology, rather than a leader. Tesla is a greedy corporation that has a disregard for safety. The Tesla model S. is an E-Pinto.