Tesla plans a share buyback program between $5 billion et $10 billion for 2023.
Elon Musk took out the carrot.
Tesla shares have lost 16.3% since September 30, which translates into a decline in market value of approximately $135 billion.
The decline is likely to continue, given the group’s mixed results in the third quarter and cautious forecast for the whole of 2022.
“As we look ahead, our plans show that we’re on track for the 50% annual growth in production this year. Although we are tracking supply chain risks, which are beyond our control,” Chief Financial Officer Zach Kirkhorn told analysts during the earnings’ call. “On the delivery side, we do expect to be just under 50% growth due to an increase in the cars in transit at the end of the year .”
He added: “This means that again, you should expect a gap between production and deliveries in Q4. And those cars in transit will be delivered shortly to their customers upon arrival to their destination and Q1 [of 2023].”
Tesla should therefore produce nearly 1.4 million vehicles in 2022 and deliver over 1.4 million units. It would be a record in both cases, but the firm had hoped to deliver 1.5 million vehicles in 2022.
Tesla posted a third-quarter net profit of $3.3 billion on revenue of $21.45 billion, the company said on October 19. Despite a 56% increase, revenues came below the $21.96 billion anticipated by analysts.
Faced with this avalanche of not very reassuring news, Musk pulled out the bazooka. Indeed, the whimsical CEO indicated that Tesla had discussed a massive share buyback program, intended to remunerate the shareholders by boosting the share price.
This share buyback program would be between $5 billion and $10 billion, the tech tycoon told analysts during the earnings’ call.
“We debated the buyback idea extensively at board level,” Musk said. “The board generally thinks that it makes sense to do a buyback. We want to work through the right process to do a buyback. But it is certainly possible for us to do a buyback on the order of $5 [billion] to $10 billion even in the downside scenario of next year. Even if next year is a very difficult year, we still have the ability to do a $5 [billion] to $10 billion buyback.”
He added that it “is obviously pending board review and approval.”
The tech tycoon, however, seems optimistic that this will be done.
“So it’s likely that we will do some meaningful buyback,” he concluded.
The announcement also comes a few months after Tesla carried out a stock split. In recent days, investors have been speculating about a buyback on Twitter where Musk is very present.
“Tesla is having PE ratio compression that can be solved only by buyback and/or by 2x earnings increase,” a Twitter user suggested on October 3.
“Noted,” Musk responded.