KoGuan Leo, co-founder and Chairman of IT provider SHI International and the third largest shareholder of Tesla (TSLA), urged its founder and CEO, Elon Musk, to announce $15 billion worth of share buyback immediately.
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Leo tweeted, “Fremont, Shanghai, Austin, and Berlin money printing machines are running in full speed, Tesla can invest in FSD, bot and factories while buying back its undervalued stocks.”
A self-proclaimed Tesla bull, Leo believes that now is the right time to invest in stock buybacks when Tesla is trading at its most historic lows. TSLA stock has lost nearly 41% year-to-date, with an almost 38% plunge since the day Musk disclosed his Twitter (TWTR) take.
Leo also admits that he keeps buying TSLA shares whenever he has the cash and that he plans to hold on to them for a long period.
As of March 31, 2022, Tesla’s free cash flow stood at $2.22 billion, and Leo projects it will grow to $8 billion in 2022 and $17 billion in 2023 (post capital expenditures).
According to Leo, this is more than enough cash to fund buybacks of $5 billion this year and $10 billion next year. Most importantly, Leo believes that the move will provide some relief to investors amid the current chaos and also “Shock and wake up few braindead analysts to their senses.”
Leo’s suggestion was welcomed with open arms by Tesla fans. Gary Black, Managing Partner of The Future Fund LLC, also gave out his own projections for Tesla’s free cash flow (FCF) and openly supported Leo’s idea of a buyback.
Meanwhile, a few have even disagreed and said that investing back in the company’s growth is the only good option.
Recently, Wall Street analysts have been lowering Tesla’s price target due to several reasons (plant shutdown in Shanghai, supply chain issues, and rising input costs of materials), which is also shaking investors’ confidence.
Tesla is practically debt free and the huge cash sitting on its balance sheet does not earn much in terms of interest. Hence, the suggestion to undertake buybacks may be a prudent way to employ the money. Notably, even after undertaking the buybacks of $15 billion, Leo suggests that Tesla will still have abundant cash to fund its growth engines.
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