That certainly applied to the brilliant Serbian-American electrical engineer Nikola Tesla, famous for his pioneering work on the alternating current (AC) electricity supply system.
Less well known is the fact that he squandered his personal fortune on a string of failed technical ventures and tore up the original contract governing his royalty payments from the AC system – technology that still lights our homes 130 years on from its development. That someone like Mr Tesla could die virtually penniless shows that technological nous is no guarantee of commercial acumen, though he certainly made his mark.
The same could be said of Elon Musk – at least in terms of driving change. He has arguably done more to propel us towards the age of electric motoring than anyone. It does not end there, of course. He also heads up endeavours engaged in space travel (SpaceX), machine learning (Open AI) and hypersonic transit (Hyperloop), to name but a few.
Tesla Inc (NASDAQ: TSLA) continues to attract retail and institutional investors in their droves. Shares in the group now change hands for $1,377 (£1,138) apiece, representing a barely believable sevenfold increase over their value at the end of May 2019, or around double the consensus target price.
With the current market-cap standing at $258bn, Elon Musk’s brainchild has eclipsed Toyota Motor Corp (TYO: 7203) as the world’s most valuable automotive brand. It is now worth more than four times the combined value of General Motors (NYSE: GM) and the Ford Motor Company (NYSE: F).
As you might expect, Tesla revenues are growing faster than its larger rivals, while net tangible book value per share is on an upward trajectory. More importantly, it generated free cash-flow for the first time in 2019, but the recent share price surge is difficult to justify unless Tesla, as some analysts predict, quadruples its revenues between now and 2025.
From a profitability standpoint, the group registered a positive return on capital last year and metrics have generally been running in its favour, with selling and administration costs narrowing appreciably as a proportion of sales, although this was somewhat at odds with a gross full-year margin which trailed the five-year average by 260 basis points.
A great deal rests on the sales performance of Tesla’s Model-Y SUV, which started wheeling its way out to customers at about the same time that Covid-19 came calling. The subsequent lockdown depressed deliveries, but the virus holds no fears for the Tesla chief, who reopened the group's electric car factory in Fremont against California state guidelines. He remains confident that installed capacity is sufficient to achieve production of 500,000 vehicles through 2020, though the possibility exists of further supply chain disruption.
Elon Musk has been heavily critical of the quarantine measures, regularly taking to social media to criticise the severity of US public health policy on the issue. The regular polemics have not played well with Pensions & Investment Research Consultants (PIRC), a London-based shareholder advisory company, which takes the view that the supposedly erratic behaviour of the Tesla supremo poses “a serious risk of reputational harm to the company and its shareholders, particularly through the use of his Twitter account", citing the infamous "pedo guy" defamation tweet.
PIRC is urging shareholders to vote to remove Elon Musk from the group's board, but the stock valuation may well be subject to key person risk regardless of his Twitter antics. Maybe the Tesla boss does not inspire the same cult of personality enjoyed by the late Steve Jobs at Apple Inc (NASDAQ: APPL), but he has been highly successful in getting people to push their capital his way.
Tesla might not be too big to fail, but it may be too indebted. A lot is riding on its future as a going concern. At the end of 2019, net debt was outstripping shareholder funds and a quick ratio of 0.6 suggests the company could struggle to meet its short-term obligations if market disruption drags on longer than expected.
I wonder what Nikola Tesla would make of the company that bears his name? History suggests that he would have held on come what may, but perhaps now is the time to take advantage of the recent surge as an awful lot of things have to go right to justify the current rating.
