Tesla investor Baillie Gifford: Musk undervalues firm

James Anderson of Baillie Gifford

Edinburgh-based fund management giant Baillie Gifford, one of Tesla’s biggest shareholders, has claimed that Tesla could be worth more than the $420 a share that founder Elon Musk said he was prepared to offer to take Tesla private in a controversial tweet, according to a report in London newspaper The Times.

Musk announced on Twitter that he was considering taking Tesla private for $420 per share, or roughly $72 billion, in what would be the biggest deal of this kind.

According to The Times report, James Anderson, a leading fund manager at Baillie Gifford, which owns roughly 7.8% of Tesla’s stock, said that while Tesla’s prospects were uncertain, its value was “much higher than $420 a share, probability-adjusted.”

Much of Baillie Gifford’s stake in Tesla is owned through its flagship fund, the Scottish Mortgage Investment Trust, which has made major investments in a number of prominent tech firms.

Baillie Gifford manages £193 billion of assets.

The report said Anderson declined to be drawn further on the merits of Musk’s proposal, saying only that he would like more indication of the funding.

“We’ll take our time to talk and think,” he said.

Musk said Tesla shareholders who wanted to stick with the company if it went private would be able to do so via a private special purpose fund.

However, the report said Anderson suggested that rules preventing some funds owning unlisted securities could be a stumbling block.

“It’s not clear that most of our clients could own [Tesla] privately, though it would be fine for Scottish Mortgage,” Anderson told the newspaper.

Anderson also said he was “not bothered” by the unorthodox way that Musk made his plans known in a tweet rather than a more conventional announcement.

Twitter was a “very public” way of disseminating the information, Anderson said.

Baillie Gifford’s official response to Musk’s announcement was: “As long term shareholders, we will take time to reflect upon this development.”

Anderson has been patient with Musk desite the Tesla founder’s unorthodox methods.

In the last annual report of the Scottish Mortgage Investment Trust, Anderson wrote: “We need to be clear that the ‘production hell’ that Elon Musk spoke of entering has been both more persistent and at a lower circle of hell than we thought likely.

“But we do not believe that it is likely to fundamentally endanger the intense brand loyalty that has been built.

“We still believe that the business model is intact.

“We cannot be certain in these opinions but we think the rewards for shareholders if they prove to be justified considerably outweigh the risks.

“As ever we do not want to interrupt the potential for exponential compounding.

“We therefore believe it appropriate to resist the temptation to give into hysterical headlines and storm of hedge fund criticism that is the daily round at present.

“We intend to endure.”