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A Closer Look At The Tesla - Maxwell Technologies Deal

Feb. 05, 2019 9:50 PM ETMaxwell Technologies, Inc. (MXWL), TSLA132 Comments


  • Maxwell Technologies is developing interesting cutting-edge technology.
  • The deal allows Tesla to trade equity for cash.
  • There's potential for a competing bid to come in.
  • Looking for a community to discuss ideas with? Special Situation Report features a chat room of like-minded investors sharing investing ideas and strategies. Get started today »

Tesla (NASDAQ:TSLA) just acquired Maxwell Technologies (NASDAQ:MXWL). This is a very savvy acquisition. Tesla is trading equity for cash, acquiring technology that can give its competitors a headache and it will allow Tesla to tout its proprietary and advanced battery technology. Helpful in the PR wars with the detestable short sellers. The transaction adds an interesting dimension to the Tesla trade.

I've recently reviewed the Tesla earnings call and I am currently short the stock. The primary reason being the company is running out of options and it is refusing to raise money.

Even if you are short you should be able to admit it when a company gets something right. This acquisition looks like one of those things. Props to Tesla on this one. Here's why I like it:

Equity for cash

Tesla traded equity for cash in this deal. It is paying Maxwell's stockholders in stock but after the close will get access to Maxwell's ~$69 million cash balance.

Source: Maxwell presentation

The economic reality here is that the purchase price of $218 million is only $149 million. Even better the price is paid with its rich equity while it receives actual hard U.S. dollars.

Annoying the competition

Maxwell is supplying the automotive market. It has a number of design wins to supply automakers with its products. These platforms are only now coming online, meaning revenue should ramp up from here.

I understand that the company is the only company that is able to deliver e-active suspensions. That's interesting because this would grant Tesla a unique suspension (something people like about its cars already) advantage. From the last Maxwell earnings call:

We continue to see increasing interest in Maxwell’s range of automotive solutions primarily in peak power, autonomous driving and E-active suspension applications. Each of these are large market opportunity

Data by YCharts

Check out the Special Situation Investing report if you are interested in uncorrelated returns. We look at special situations like spin-offs, share repurchases, rights offerings, M&A events, etc. But we also have a keen interest in the commodity space. Especially in the current late stages of the economic cycle.

This article was written by

Bram de Haas profile picture
Special-Situation And Event-Driven Ideas To Improve Risk Adjusted Returns
15 years of investing and I feel like a rookie in his first year at the academy. My roots are in the value school but over time I've learned to respect different approaches. I'm interested in what quants do, options traders do, and even what WallStreetBets is doing (keep your friends close and...)

I gravitate towards special-situations. That means situations around companies or the market where the price can move in a certain direction based on a specific event or ongoing event. This eclectic and creative style of investing seems to suit my personality and interests most closely.

Since 2020 I host a podcast/videocast where I discuss (special-situation/event-driven) market events and investment ideas with top analysts, portfolio managers, hedge fund managers, experts, and other investment professionals. I highly recommend it (pick episodes around topics that interest you) for the amazing guests that come on with regularity.

I've been writing for Seeking Alpha since 2013 after playing p0ker professionally. In 2018 I founded Starshot Capital B.V. A Dutch AIF manager. Follow me on Twitter @Bramdehaas or email me Dehaas.Bram at Gmail

Analyst’s Disclosure: I am/we are long MXWL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

short Tesla

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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