Tesla shareholder on stock split announcement: 'This has been a long time in the making'

Galileo Russell, HyperChange Founder, joined The Final Round to discuss Tesla announcing a five-for-one stock split and how the company stacks up to its competition.

Video Transcript

SEANA SMITH: Well, another huge mover today that we were closely tracking here at Yahoo Finance was Tesla, shares closing up just over 13%. Now, the move came after the company announced a five for one stock split. So for more on this, we have Gali Russell. He's a Tesla shareholder, and also founder of HyperChange.

And Gali, it's great to have you back on the show. From a fundamental perspective, we talked about this at the start of the show, nothing really changes about Tesla stock. I mean, a few more people will be able to buy it because of its lower share price. But what is your reaction to Tesla's decision? And why do you think they decided to do this now?

GALILEO RUSSELL: Yeah, I think this has been a long time in the making. I mean, this stock IPO'ed about a decade ago and has risen 4000%. You know, it was $15 or $20 a share. Now, it's a lot harder for investors to buy in.

I actually have been advocating this on my channel for a long time, even a more aggressive, like, one for 20 or 30 split, because I really think, you know, it could be 10 years before a lot of people in college or high school buy a Tesla car, but a lot of them want to buy stock today, get started investing, be involved in the company. These are future customers. And I got a ton of feedback from really young subscribers to my YouTube channel being, like, man, I wish I could buy into Tesla, but I can't afford it.

And so I really think this is an awesome move for Tesla. We've seen them, you know, lead in a lot of different ways for getting smaller retail investors involved, like on their conference calls and doing their part to sort of democratize the financial system. So I was super pumped to see them open this up and sort of, you know, give a win to the little investor.

RICK NEWMAN: Hey, Gali. You know, we were talking about this a little earlier in the hour before you came on, and we did mention that, you know, you can buy shares in ETFs and things like that. But Tesla, it's hard to buy an ETF that represents what Tesla does. So they're represented, for example, in some auto industry ETFs, but Tesla views itself as a disruptor in the auto industry, not as part of the auto industry.

And it's in some other tech funds. So I'm just throwing that out there to say this is a-- this is-- it's really kind of is an unusual stock. You can buy tech stocks in tech ETFs, like Apple, Microsoft, and Google, but it's hard to do that with-- with Tesla.

GALILEO RUSSELL: Yeah, and that's why people have really had a hard time understanding the valuation and rationalizing what is going on with Tesla, because they try and put them in the box of another automotive company. You know, what happened when Apple turned the phone into a computer? Unlocked trillions of dollars of market cap of applications built on top of that you-- sort of breakthrough.

And Tesla's about to-- or is turning the car into the computer. And you know, fast-forward three to five years, they're going to have a marketplace of apps. There's going to be trillions of dollars of market capitalization built of companies on top of this autonomous vehicle computer platform that Tesla's building.

You know, they're also going to turn our roofs into energy generation machines with the solar panels. They have the batteries. So this is a lot more and a lot different than a traditional car company. And so I think it's sort of a totally unique beast.

SEANA SMITH: Well, then, Gali--

RICK NEWMAN: You know, I'm one of-- I'm one of the people who thinks the company might be overvalued simply because those ancient dinosaurs known as General Motors and Toyota, they actually do have some of the same technology. They know how to build some things. Do you-- do you perceive any risks for Tesla's future?

GALILEO RUSSELL: Not from Ford or GM. I mean, those companies, I think, are going to have to get really lucky if they're not going to go bankrupt. Their expertise is in outsourcing everything, having MBAs tell them what to do, hiring really top executives, not investing in the future of technology. They're not vertically integrating.

You know, I mean, they don't have the-- like Tesla's-- so there's-- on Kato Road in Silicon Valley, Tesla's hiring 400 people to build batteries 24/7 around the clock. This is the type of commitment that is going to allow them to bring this break-- breakthrough next battery cell to market. That is the reason why they're the only car company with a 300 or 400-mile EV on the market that they can sell profitably.

GM can't-- they literally can't even come up with an electric vehicle that has 300 miles of range, even though Tesla did 10 years ago. Like, its-- it's almost, like, laughable. And I think it's just because they're not good at it. You know, they're good at burning-- creating engines and motors that burn fossil fuels, not the electric drive train, and it's just a totally different technology platform. And that's why I think companies like Rivian and NIO are a lot more of the competition for Tesla than legacy automakers.

RICK NEWMAN: Well, those soon to be bankrupt legacy automakers, they do make a lot of money selling a lot of pickup trucks and a lot of SUVs that people are buying today.

GALILEO RUSSELL: I would strongly encourage you to look at their financial results in the last quarter, and you'll see both of them lost a ton of money, and Tesla was profitable.

SEANA SMITH: Well, Gali, so if you don't think that-- that they are competitors, you're totally discounting them, saying that they're going to be lucky if they don't go bankrupt, who should Tesla be worried about? Who is their strongest competitor out there right now?

GALILEO RUSSELL: Yeah, I mean, it's not like they're not competitors. It's just they're not going to be able to bring an electric vehicle to market with the same specs, at the same price, with the same features. And I think, you know, it's the innovator's dilemma. Are you going to cannibalize your most high-margin pickup truck with a really low-margin electric one to start? No. That would kill your business.

So lots of-- a lot of boardroom dynamics going on there. I think a threat to Tesla that is not often talked about that I actually think is one of the biggest things is they don't have a personal mobility solution. I think there's an explosion-- why did Bird scooter hit a valuation of $2 billion overnight? Because of that huge consumer traction.

You know, as cities get more and more crowded-- look at India. Why do they sell five times as many two and three-wheel cars in-- versus, you know, four-wheel sedans? Because as urbanization occurs, I think there's going to be a huge explosion that we're already seeing, like electric bikes, motorcycles, scooters.

And maybe the car isn't the most efficient way to get people around a city anymore. 80% of car trips only have one people, but we have enough batteries and drive train to move around five people. That seems super inefficient.

So if I was thinking about the biggest threat for Tesla, if I was meeting with Elon Musk about one thing we should add to our product roadmap and a strategy that we're not addressing, it's how do we address the personal mobility segment? This is a huge opportunity that's inevitably going to be the-- you know, a huge piece about everybody gets around in cities, and Tesla has not announced an e-bike or an e-scooter. And so that's something I'm personally just super curious about.

RICK NEWMAN: Can I throw in my own pet idea here and see what you think, Gali?

GALILEO RUSSELL: Sure.

RICK NEWMAN: I think Tesla should revolutionize lawn equipment. I'm talking about gas-powered-- Seana's laughing. She has some experience in the suburbs. I'm talking about gas-powered leaf blowers, gas-powered lawnmowers. They're noisy. They're obnoxious.

And a lawn mower pollutes more than a car, because it doesn't have any kind of filter on it. They don't-- they're not required to have, you know, any kind of filter for the exhaust. So I think Elon Musk should get into lawn equipment. Honda does it.

GALILEO RUSSELL: Yeah. I love it, Rick. And so there's actually a startup called EGO, which makes, like, electric lawn equipment, which is doing really well that's awesome. But I think this is a perfect analogy for why Tesla's so amazing. Everything is going electric, even lawnmowers, even leaf blowers, even airplanes and ships in 10 years.

And so this new technology propulsion platform, everything burns fossil fuels to get around, to heat our homes, to do everything. It's all going electric, even leaf blowers. So that's why you have to think about this as way more of an opportunity than selling sedans or crossovers. They're going to semi trucks, pickup trucks, batteries for the grid, you know, electric bikes and scooters.

Like, this atomic unit of that new battery cell that they're building at that Kato Road facility I was telling you about in Silicon Valley, that is the code to unlocking everything-- electric lawnmowers, leaf blowers, everything. That's why, to me, Tesla's so exciting. It's about, you know, us all changing how we create, store, and use energy in society without fossil fuels. And that's really the bet that-- you know, that's really what Tesla's solving.

RICK NEWMAN: Black & Decker already makes some of this stuff, but it's utilitarian. It's not sexy.

SEANA SMITH: Hey, Gali, I mean, this is interesting. I like all of these ideas that are floating around, what Tesla can do next. But in terms of their immediate obstacle, I think a lot of investors, the big question out there is how they're going to scale their battery supply going forward? And we have this battery event, I think it's Battery Investor Day coming up. So I'm just curious just what you think they're going to announce and how much of their valuation really hinges on this.

GALILEO RUSSELL: Yes. So this is huge. I think this is why Tesla's stock is soaring is because of this Battery Day. So I just put out a video on my channel last week that basically-- I think it says what Tesla's going to announce. They've got a big battery cell production house. They're already ramping this production.

And what did they announce in between when I was last on Yahoo? This Austin factory. They confirmed they have their biggest factory ever in Austin, Texas-- 2,000 acres, ecological paradise right along the river. It's going to be so, so awesome. They're going to be building the Semi truck and Cybertruck there.

So if you think about those two vehicles, they're a little more rugged. They need a little more performance than a sedan, because you really need that battery to move a ton of weight around super cost efficiently. And so I think this is the first perfect use case for that new battery cell they're coming up with is to address this-- unlock a massive new segment of pickup trucks and Semi trucks that they're going to be building out of that Austin facility.

And so I think this is the big bottleneck on growth. Tesla, what are they doing, $25, $30 billion in revenue, maybe $50 billion in revenue at maturity with Shanghai 2? But this Tesla Texas Terafactory that they're building in Austin is, you know, $20 to $30 to $40, $50 billion additionally in incremental revenue as it scales.

And so watching the pace of progress on this-- I mean, they're building new factories in Shanghai, Berlin, Austin all at once that are all going to be pumping out new cars in 18 months. Like, I don't think they would be doing that if they already hadn't figured out a way to scale the battery production. So to answer your question, Seana, like, yes, battery production and scaling that is the biggest constraint, but Tesla's signaling we're already spending billions on CapEx to build the cars because we already figured out how to build those batteries. They're just going to tell us how to do it at that investor event.

RICK NEWMAN: Hey, Gali, one more, one real quickly. General Motors is going to unveil the electric Hummer this fall. Interested in that?

GALILEO RUSSELL: No, not at all, because LG--

RICK NEWMAN: How could you not be interested in the electric Hummer?

GALILEO RUSSELL: Tesla builds their electric cars. GM outsources it to LG. You know, it's a third-party off-the-shelf battery. All the electric-- like, they're not a software company. Like, everything runs on software. Software is eating the world.

You're going to get in your car. You're going to say, take me here. It's going to take you there. Try-- try putting on a song in a GM or Ford or doing anything electronically, try an over-the-air software update. These are just not computer companies.

When I am going to buy my future transportation spaceship product, I want this to be software connected, over-the-air updates, app marketplace, built by a company like Apple or Tesla, not some legacy thing like GM or Ford, which literally runs on dinosaur juice, or that's how they built their company. Like, you know, I mean, talk to your smartest software engineers or software friends. How many of them are pumped to get a job and move to Detroit and go work for GM and Ford? Zero.

And that sounds-- sounds simple. But a company is just a group of people. The smartest people in the world are flocking to code for Tesla, and nobody wants to code for GM or Ford. So that's why I'm not pumped about a vehicle where so much of my consumer experience is going to rely on how good those coders work.

SEANA SMITH: Dinosaur juice. I think that was my favorite line from this interview. But Gali Russell, we have to leave it there, Tesla shareholder and also founder of HyperChange. Thanks so much for joining the show.

GALILEO RUSSELL: Yeah, thanks for having me.

SEANA SMITH: All right.