Tesla/Hertz: supercharged
How to regain relevance as a meme stock.
Hertz Global Holdings Inc., barely four months out of bankruptcy, placed an order for 100,000 Teslas in the first step of an ambitious plan to electrify its rental-car fleet, according to people with knowledge of the matter.
It’s the single-largest purchase ever for electric vehicles and represents about $4.2 billion of revenue for Tesla Inc., according to the people, who asked not to be identified because the information is private. While car-rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is paying close to list prices.
Great scoop! Now, you might be wondering what the market has made of it. After all, the reborn Hertz has a market capitalisation of almost $12bn, or $21bn if you include debt, so this one order represents a third of its entire equity value. Or, double the $1.8bn it had in cash and cash equivalents at last count at the end of June.
Quite an undertaking then, particularly given Tesla has a reputation for making cars that consumers love, until they have to get them serviced. Don’t take our word for it. Consumer intelligence company JD Power ranked Tesla 30th out of 33 automakers on reliability in its benchmark study of American car brands. While in 2019 a Swedish car rental company went bust citing “recurring technical problems” with its fleet of Teslas. Still, a $4.2bn order will likely buy Hertz lot of spare service capacity from Elon Musk’s car company. Or so you’d think.
What’s the stonk of all stonks doing? Well, true-to-form, in pre-market Tesla is hitting all new time highs -- up 4.3 per cent to $948.50. That’s a market cap of some $940bn. In other words, each car Hertz ordered has added $390,000, roughly ten times the per car ticket price, to Tesla’s market value. And, in case you were wondering, that $39bn pre-market move is roughly equivalent to half a General Motors.
Still, it was only a matter of time wasn’t it? After AMC decided to supercharge its own meme stock status with its decision to embrace crypto as a payments system. Hertz, once the meme stock de jour, needed to do something to regain relevance. And, as it turns out, that something involved both Tesla and Tom Brady.