ACC 345 Business Valuation Report Template
Summary Business Valuation Report of
Tesla Inc.
Tesla Inc.
Report Date, 2021
Contents
INTRODUCTION 3
Nature, Background, and History 4
Facilities 4
Customers 4
Management 4
Competition 4
Strengths and Weaknesses 4
Ownership 4
Major Shareholder Transactions 4
Business Risks 4
FINANCIAL ANALYSIS 5
Financial Analysis Overview 5
Balance Sheets 5
Assets 5
Liabilities 5
Stockholder’s Equity 6
Income Statements 6
Normalization Adjustments 6
ECONOMIC OUTLOOK 7
Industry Analysis 7
Industry Overview 7
Competitive Landscape 7
Products, Operations and Technology 7
Sales and Marketing 7
Finance and Regulation 7
Regional and International Issues 7
Labor Trends 7
General Economic Analysis 7
Interest rates 7
GDP 7
International and Domestic Trade Policy 7
Monetary Policy 7
Fiscal Policy 7
BUSINESS VALUATION 8
Valuation Approaches 8
Asset Approach 8
Income Approach 8
Market Approaches 8
Selected Method - Income Approach 8
Prospective Analysis 8
Discount rate 9
Valuation calculation 10
DISCOUNTS AND PREMIUMS 11
Discount for Lack of Control 11
Discount for Lack of Marketability 11
FINAL CALCULATION OF VALUE 12
SOURCES 13
INTRODUCTION
Description of the Assignment
Guidance: Assume the intended use is for the sale of a minority stake of the company you’re valuing. This should be stated in this section of the report.
Standard of Value
Guidance: Assume the premise of value is that the business is a “going concern” as opposed to liquidation or other premise. Assume the standard of value is fair market value, as opposed to fair value, investment value, liquidation value or some other standard. This should be stated in this section.
Tesla Inc.
Brief History/Overview
Tesla is an American Electric and Clean Energy based company founded in the year 2003. The company was named Tesla as a tribute to the Nikola Tesla. The company was formed to develop electric sports cars. The headquarters of the company is based in California and the other locations where the facilities of the company are based are in Europe, Middle East, Asia and Australia. The first retail store of the company was opened in the year 2008 in Los Angeles. The main segment for the company is plug-in market and purely electric market. The major model introduced by the company are Model S, Model X and Model 3. The management team of the company consists of Elon Musk who joined the company as the CEO in the year 2008. He provided the company most of the initial required funding and also much of the Brand Value. The Chairwomen of the company is Robyn Denholm who joined the company in the year 2014. The board of the company consists of 4 other independent directors. The major competitors of the company are the traditional and old companies like Ford Motors, GM Motors etc. These companies are not only competing with their oil-based car models but also trying to enter the electric car segment to compete with Tesla in their filed as well.
The major strengths of the company are Innovation, ability to attract the top talent and best in class Electric Vehicles. The company spends a fortune in Research and Development so that it can continuously develop new technologies for its cars. In the year 2019, Tesla Model 3 was the most sold electric vehicle in the US market and the annual sales of the company has been growing each year. The largest Individual Shareholder of the company is Elon Musk with over 21% of the total ownership and this is the percentage of ownership that will be valued. Institutional Investors hold over 48% of the total ownership and remaining ownership is held by several Mutual Funds. There has not been any major shareholder transaction incu
ed in the company for the past number of years. The last major transaction was when the founders of the company Martin Eberhard and Marc Tarpenning left the company and sold their majority holdings.
The major business risks of the company are that the products offered by the company are very expensive and can be purchased by high worth individuals only. The company has a very limited capacity to manufacture the batteries which are used to power the cars due to the difficulty in manufacturing the lithium-based batteries. Due to this the company cannot scale the production of its vehicles. The company is also facing stiff competition from other car manufacturers who are also trying to enter the electric car segment and have huge capital to fulfill the dream. Also, one of the major risks of the company is the Key Personnel Risk. The company is heavily reliant on its CEO Elon Musk and have stated this fact in their annual report as well. But since Musk is only part time CEO and does not devote his entire time to Tesla, this is a huge risk for the company.
4
FINANCIAL ANALYSIS
Financial Analysis Overview
Balance Sheets
Assets: Total Assets (in Thousands) of the company as on 31
12/2020 are USD 52,148,000. The largest component of the total assets is the Cash and Short-term investments. Cash and Short-term investments cover almost 37% of the total assets of the company. The next major component of the total assets is the Net Property and Plant which amounts to 24% of the total assets of the company. The major change in the total assets of the company in the year 2020 in comparison to the year 2019 is due to the increase in Cash and Short-term investments which the company raised due to the issue to additional share capital.
Liabilities: Total Liabilities (in Thousands) of the company as on 31
12/2020 are USD 29,923,000. The largest component of the total liabilities is the Long-term Debt and Leases. This amount to 32% of the total liabilities of the company. Next major component is the Accounts Payable and Accrued Expenses of the company, this component amounts to 30% of the total liabilities of the company. In comparison to the previous year the change has incu
ed in Accounts Payable which increased 60% in comparison to previous year.
Stockholder’s Equity: The total amount of Shareholders (in Thousands) of the company as on 31/12/2020 are USD 22,225,000. The largest component of the Stockholders Equity is Additional Paid-In-Capital. The major change in the cu
ent year in comparison to the previous year is the increase of 114% in the Stockholders Equity of the company. The company issued additional shares to raise money for future expansion.
The major competitors of the company are GM Motors and FORD motors. These companies have very little debt in their balance sheet in comparison to TESLA. TESLA has very high amount of debt on its balance sheet which is not sign for the company and shows that the operating model of the company is very risky in comparison to its competitors. Another major aspect is the amount of idle Cash with the company. TESLA has huge cash reserves for which the company has not been able to find the co
ect investment opportunity. Both GM motors and FORD has low cash reserves which shows that these companies maintain enough cash to support the liquidity of the company.
Income Statements
The Sales revenue (in Thousands) of the company for the year ended 2020 is USD 27,236,000, which has increased 31% in comparison to the previous year. The Direct Costs of the company is USD 24,906,000 which has increased 21% in comparison to the previous year. This is in line with the rising revenue of the company and also shows that the company has achieved greater efficiency. The Operating Income of the company is USD 1,994,000 which has increased 2990% in comparison to the previous year. The Net Income of the company is USD 721,000 which has increased 184% in comparison to the previous year.
The Free Cash Flow of the company during the year 2020 was $2.786 Billion and the Free Cash Flow of the company during the year 2019 was $1.078 Billion. In the year 2020 the Free Cash Flow increased 158.44% in comparison to the year 2019. The reason for this increase is that the company has not made any significant Capital Expenditures during the year 2020.
During the year 2020, the company has made sufficient profits to distribute dividend to its shareholders. But as per the Annual Report of the company, the management is not going to distribute any dividend as the company is retaining all the profits for future expansion. The history of the company supports this statement as the company has never declared any dividend to its shareholders.
Normalization Adjustments
The company did not have any extra-ordinary items or any accounting changes in 2020 or in any of the previous years.
ECONOMIC OUTLOOK
Industry Analysis
Guidance: Research your industry by reviewing a select group of your company’s peers. By reviewing the annual report of 2-3 competitors you will get an understanding of these items below. You may also search the web for scholarly articles on your chosen industry or recent industry reports. Focus on the suggested items below:
Industry Overview
Competitive Landscape
Products, Operations and Technology
Sales and Marketing
Finance and Regulation
Regional and International Issues
Labor Trends
General Economic Analysis
Guidance: Research the primary economy in which your company operates. Use the U.S. as the default if it’s a global firm, but try to incorporate any important global factors if a majority of its operations is a
oad. Focus on the factors suggested below:
Interest rates
GDP
International and Domestic Trade Policy
Monetary Policy
Fiscal Policy
Industry Analysis
Tesla overview
Electric vehicles might be better, quicker, and more enjoyable to drive than gasoline automobiles, according to a team of engineers who founded Tesla in 2003. As of today, Tesla produces not just all-electric vehicles, but also renewable energy producing and storing facilities that are infinitely scalable. Electric vehicle maker Tesla believes that a zero-emission future is more feasible the faster the globe shifts away from fossil fuels (Tesla, 2021)
Competitive landscape
When it comes to battery-electric automobiles, Tesla is the clear market leader. Tesla Motors produced 50,000 Model S cars in 2015, and they anticipate to sell 80–90,000 in 2016. Around XXXXXXXXXXModel 3 reservations have been made. Nearly 200 businesses and galleries are represented by Tesla. Tesla has a network of superchargers and destination charging stations that totals in the hundreds of locations.
GM now manufactures the Chevy Volt, which is the second best-selling electric car in the world (behind the Tesla Model S) as of May 2016. In 2015, it sold 15,393 units. It is a plug-in hy
id with a mobility of 53 miles on electricity alone.
Mercedes-Benz manufactures the all-electric B class, which is produced by Daimler. By 2025, they want to offer ten electric car models under the EQ
and.
Products, operations and technology
Tesla Motors' business plan aims to develop and produce best-in-class automobiles while also advancing the deployment of electric vehicles and infrastructure. Tesla's business concept is heavily supported by their operational strategy. Automotive OEMs have traditionally been regarded to be industry laggards, but Tesla has retained its agility and willingness to innovate fast. Tesla has also constructed charging infrastructure in the United States and other areas of the entire globe to assist Model S/X customers. Tesla owners may use these Superchargers for free, and they can offer about half of a full charge in 30 minutes.
Sales and Marketing
Tesla's marketing strategy, then,