Exactly how Daimler is hedging its investment in Tesla Motors is not being revealed, but since the electric vehicle company's stock has been roller-coasting all around the place this year, we're not too surprised that some sort of stabilization methods have been put in place. The TSLA stock went on a big drop from its $193 high (all the way down to $121.58, but has since begun climbing again to around $144) since news of independent and isolated fires in Tesla Model S EVs were reported earlier this year. The ups and downs were enough for Daimler to hedge its holding in Tesla and set up a calmer partnership as the two companies move forward together.

Daimler said in a statement that, "The objective of the transaction concluded is to protect the value of Daimler's shareholding in Tesla, whilst allowing Daimler to retain significant participation in any further appreciation of Tesla share price during the three year collar agreement." Daimler owns 4.3 percent of Tesla. Currently, the public information is that Tesla supplies components (motors and batteries) for the Smart Fortwo ED and the Mercedes-Benz B-Class EV that is coming next year. Seeking Alpha says B-Class EV sales will be "relatively light in the US."

As stated, we're not sure how Daimler is hedging its investment, but one definition of hedging is to "mak[e] an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract."


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    • 1 Second Ago
  • 10 Comments
      Jerome Barry
      • 7 Months Ago
      Uh, buy LEAP puts each year. Hedged.
      Smoking_dude
      • 7 Months Ago
      Daimler acknowledged that the Tesla battery pack (yes the cells origin form panasonic) is better than their own pack. they also tried to sell li-tec because of too low battery prices. they aready said that the b-class has a "tesla inside" so why not.
      BraveLil'Toaster
      • 7 Months Ago
      Well, about Tesla's stock price. I'd be shocked if Daimler is willing to buy shares (or really, even own them) in Tesla at anywhere near the current market rate. Their stock price is clearly more about investors' enthusiasm for Tesla's future than it is about the dividends they're earning today. Just as an example, Daimler's own stock value is $62 today, with a 52 week low of $38. They are, of course, a much larger, much more profitable company than Tesla, and by all rights in any rational market, should command a considerably higher stock price. Anyone who might tell you that Tesla stock is a worthwhile purchase at $144 or even $121, is only trying to sell you their stock in Tesla.
        Grendal
        • 7 Months Ago
        @BraveLil'Toaster
        Tesla is considered a "cult" stock which, as you said, is about the possibilities of what Tesla will do and not just about what they have already done. That makes for very volatile fluctuations in price, which if you time them right can be very profitable. For example, I told a friend that Tesla was a good buy at $118. He did buy at that time. One week later it was at $144. That's roughly a 20% increase on your investment in a one week period. The stock market can be fickle but as long as the company is a strong company then your bet (since it is gambling) is fairly strong. Tesla is a good company. I would consider it a good bet that Tesla will beat its highest price of $193 when the next quarters report comes out. On the other hand if you bought a week ago at $150, then you will need to wait a while for it to go back up after the silly news about the garage fire. The stock market is gambling, so never bet what you aren't willing to lose. No one has to ever convince you to buy stock. The price is the price and you never sell stock to your friends. You buy it from a broker and then sell it there too.
          Marcopolo
          • 7 Months Ago
          @Grendal
          @ Grendal From $128, I advised 'Buy', $128 to $148, 'hold' and at $148 + 'Sell'. This advice isn't based on my opinion of Tesla's potential, products or management, just that at $150, I no longer consider any possible gains worth the potential risk, and better market opportunities exist to make more money. For long term investors, especially those who love the company and it's products, Tesla is a very well managed company with a strong (even fanatical ) small shareholder following. Investing and gambling are very similar. (but all of life is a gamble). Your advice is very sound, never invest in speculative enterprises, what you can't afford to lose. Leave speculation to competent, well informed professionals, who can adequately hedge against heavy losses.
          Grendal
          • 7 Months Ago
          @Grendal
          That makes a lot of sense. Tesla almost hit the $160 I am after today. Interestingly enough SolarCity was actually the better stock to have in the last month going from $42 to $56.
          Grendal
          • 7 Months Ago
          @Grendal
          With the NHTSA response that seemed to peak today the stock jumped well above your sell number today. I keep buying and selling the TSLA stock. That means I lose out on some of the gains but I have never had a loss since I can just wait for an inevitable rebound. My last buy, a week ago, was at $147. I didn't sell today because I think it is a reasonable guess that it will gain even more after the holiday. I'm hoping to see above $160 in the next five days. We'll see.
          Marcopolo
          • 7 Months Ago
          @Grendal
          @ Grendal My analysis and advice is intended for high net worth individuals, and professional fund managers. These sort of investors are seeking maximum returns on the medium to speculative risk funds in their investment portfolios. Tesla is still a good investment, but other investments offer better returns for professional market players. ( My sort of client's seldom develop emotional attachments to their investments).
      Grendal
      • 7 Months Ago
      Daimler has made a $#!?load of money from their Tesla investment. Close to 20 times their initial investment. It would be even more if they hadn't sold off 40% of their stake in 2012.
      Mike
      • 7 Months Ago
      Tesla's involvement in the Smart ED has long since ended. The third generation ED model was detailed here in October 2012 and already noted the Li-Tec battery pack and increased motor power. Daimler re-engineered the 3rd Generation model with all German key components. Tesla only contributed to the short-lived 2nd Generation ED model. http://www.autoblog.com/2012/10/10/2013-smart-fortwo-electric-drive-first-drive-review/