AUSTRALIA’S largest superannuation provider has about $1.2 billion invested in one of the world’s smallest car companies – and one that is yet to turn a profit.
AustralianSuper has increased its holding of California-based electric car maker Tesla to 1.19 percent of its $100 billion in investments covering 2.1 million Australians.
The investment accounts for about 3.2 percent of Tesla’s $36.7 billion market capitalisation.
The news comes as Tesla shares plunged 6.7 percent on the back of last week’s explosion involving the Falcon 9 rocket owned by SpaceX, a company formed and run by Elon Musk, the man behind Tesla.
AustralianSuper refused to tell Wheels how many of its members were exposed to the Tesla investment, which ranks as the superannuation giant’s 11th-largest offshore investment.
Tesla is the only one of AustralianSuper’s 20 biggest international and domestic share investments to never return an annual profit.
Tesla shares have fluctuated from $US150-280 (about $200-$330) over the past two years, but the trendline shows there has been minimal capital growth – and no dividends due to the lack of profits.
Of 16 analyst firms quoted on the Nasdaq website, only four recommend buying Tesla stock, with the remaining 12 issuing a ‘hold’ or ‘sell’ recommendation.
The Tesla share price has been the subject of debate among analysts, with one previously deeming it a “horrific” investment and others questioning its value given how few cars are sold and how much money the company currently loses.
Scott Phillips, director of research at The Motley Fool, referred to it as a “high-risk investment” and one that appeared to be a “straight-up bet on Elon Musk”.
“Tesla is incredibly expensive by traditional investment standards,” Phillips told Wheels.
But he said that Tesla is a relatively small component of AustralianSuper’s overall investment and that it wasn’t unusual for superannuation funds to include volatile stocks in a diversified portfolio.
Brett Taggart, managing director of Bell Partners Wealth Creation, pointed to the size of the investment relative to the fund’s overall size and said it could be part of a plan to ensure exposure to potential growth areas.
“They’re not buying the profitability of the company now … they’re making an investment for the next five, 10, 20 years,” Taggart told Wheels. “They’re trying to buy the future today.”
AustralianSuper refused to outline what it saw in Tesla as an investment.
Tesla predicted it would be a loss-maker early in its life – making cars is capital intensive – and it appears much of its share price reflects that potential investors see the carmaker currently leading the electric race.
Musk claimed in January last year that Tesla would make a full-year profit by 2020.
But competition is heating up and appears almost certain to target the Tesla formula of making desirable, fast and fun electric cars.
The Paris motor show later this month is expected to shed light on potential rivals for Tesla, with reveals of soon-to-arrive electric cars from the likes of Mercedes-Benz and Volkswagen.
The German carmakers in particular are working frantically to take advantage of the momentum Tesla has created in the electric space.