Tesla Energy Business Part of Huge Industry Disruption that Can Make it a Trillion-Dollar Company, Says Palihapitiya

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Elon Musk is the most important entrepreneur of our time, and how he develops Tesla (NASDAQ: TSLA) has become a real game changer, says Chamath Palihapitiya. Venture capitalist, engineer, and the founder and CEO of Social Capital Palihapitiya spoke with Erik Schatzker on Bloomberg's “Front Row,” explaining why he believes in Tesla and Elon Musk.

Schatzker asked Palihapitiya a question: “Is Tesla a buy currently at market cap north of $800B?” and venture capitalist answered: "Yes."

He said that he started buying Tesla shares in 2014 or 2015 and was one of the largest owners of convertible debt. Palihapitiya felt that this was the best way to bet on Tesla, which turned out to be a huge win. He said he really believes in what Elon is doing and thinks that he is the most important entrepreneur of our time.

It took people 15 years to realize that Tesla would become a legitimate car company, but when Palihapitiya supported the investment, his gamble was on something more than just cars, he said. The investor thinks that Musk hasn't been building just a car company for a long time now. However, it may take another 5-10 years for humans to realize that Tesla is developing the next arc of innovation: energy deregulation.

Palihapitiya explains that utilities spend hundreds of billions of dollars a year around the world and feel completely safe; they think they can do any kind of damage to the environment because they are protected. Nevertheless, something is happening that few predict—something that is a complete upside down switch—the disruption of energy. And, this is the only way that utilities will be deregulated.

The investor points out that "it's not going to be by law or dictated, it's not going to be a big monolithic competitor, it's going to be because every home installs hydro panels, solar panels, batteries and then software that basically allows them to live off the grid and then eventually pump their excess energy into battery solutions and other things that are controlled by cities and towns and governments who then, in turn, will turn up their usage of peakers at a minimum. And then over time, we'll have very different characteristics of usage from traditional utilities. That is what Tesla is powering. That is what allows it to be a multi-trillion dollar company."

Palihapitiya says Tesla obviously doesn't have the same return profile as when he bought it back in 2014 or 2015 at what is equivalent, now,  of 25 or 30 dollar per share. But, can it be multiples higher than where it is today? The investor said: "Absolutely."

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