A venture capitalist turned hedge fund manager, Chamath Palihapitiya returned with a bang to the Sohn Investment Conference. Just a year after announcing a big bet on the giant, Amazon; the Silicon Valley investor this year has a more controversial pick: Tesla.
Tesla – The Next Apple!
The founder and CEO of Social Capital, Chamath Palihapitiya is now looking for an opportunity in which he could get 10x returns in a time span of 10 years! He acknowledged that those investors who attended the hedge fund conference in New York, USA were likely to be skeptical that electric car giant, Tesla could be that ten baggers.
A comparison of Tesla with Tech giant, Apple!
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Palihapitiya said that he looked at a historical analog and then made a discovery that, ‘What we do know is that the early trajectory of Tesla is really close to the early trajectory of Apple!’
He further explained how once Apple was considered as a marginal player in front of other giants like IBM. And many investors believed that Apple could not become a driving or dominant force not only in the personal computer market but also in any type of technology. However Apple’s iPhone changed the perception and just like a lion, it captured the whole market of Smartphone industry. It not only leads to making huge profits for the company but also forced their competitors to cut short their prices and profits. Palihapitiya said, ‘What Apple did was create a tailwind of demand. Now let’s ask us, is Tesla running the same playbook?’
Tesla’s electric cars!
Palihapitiya said Tesla’s electric cars and their unique and invariably niche inventions could do the same thing which iPhone did for Apple. He said, ‘The point is, there’s a lot of other things that are in the offing here that we don’t even know about.’
On the new development part of Tesla, Palihapitiya said, ‘What I think is probably the single most impressive advancement in software and sensors: Autopilot’. He further said that it could become an option which would be so profitable that can even earn 100% gross margin!
Investing in Convertible Bonds!
Palihapitiya said that he will not be investing in the usual way; rather he would invest in the form of convertible bonds for the year 2022. Convertible bonds are pretty safe to invest in as these bonds pay interest to their holders and give the option to their holders the right to convert these bonds into equity shares. So, in this way Palihapitiya is planning to bet safely on the company’s growth without being taking any sort of risk of buying the equity shares. He explained, ‘We are guaranteed not to lose money. Even if the equity goes entirely to zero we are protected’.
Date:May 08, 2017