Tesla, Inc. TSLA shares have rebounded notably from its early January intraday low of $104.64. Tesla investor and fund manager Gary Black renewed his calls for the company to buy back its shares despite the resurgence seen in the stock.
What Happened: To make Tesla and its CEO Elon Musk see the merits of his recommendation, Black recounted the advice given by Warren Buffett to none other than Apple co-founder Steve Jobs
Buffett said in a 2013 interview with CNBC that Jobs once called him and the billionaire investor asked him if Apple stock was cheap. Jobs replied in the affirmative. Buffett then posed a second question. “Do you have more cash than you need?” he asked. Jobs replied that he had “a little.”
The Oracle of Omaha told CNBC, “I said, then buy back your [Apple’s] stock.” Job apparently didn’t heed his advice. When Berkshire Hathaway stock was cut by half from $90,000 to $40,000-$45,000, the company apparently wanted to buy the stock but didn’t manage to do it, Buffett noted.
“But if you could buy dollar bills for 80 cents, it’s a very good thing to do,” he told CNBC then.
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Why It’s Important: When Tesla fell off the cliff in 2022, Tesla bulls, including Black and Ross Gerber of Gerber Kawasaki Wealth And Investment Management, vociferously called for initiating a buyback as a means of salvaging the ailing stock.
Black wrote an open letter to the Tesla board, urging it to initiate a $10 billion buyback.
Musk, however, has been non-committal. On the third-quarter earnings call, he said it is up to the board to decide on a buyback program. A stock repurchase in the order of $5 billion to $10 billion could not be ruled out, he added.
Tesla operates in an investment-intensive industry, requiring huge capital spending. At the same time, returns are very attractive as well. It, therefore, may make more sense to plow profits back into future growth opportunities than to buy back shares.
This week, Tesla confirmed it is investing over $3.6 billion to grow its Giga Nevada. The company plans to set up two factories, one for manufacturing its 100 gigawatt-hour cell and another for high-volume production of its Tesla Semi.
Tesla ended Friday’s session 11% higher at $177.90, according to Benzinga Pro data.
Read next: Biden Warming Up To Musk? Tesla CEO Holds Talks With Key White House Officials Friday
Photo: Created with an image from Steve Jurvetson on Flickr
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