Tesla Rallies as Large Investor Wants More Stock

Shares of Tesla Inc. (TSLA) are higher in early Monday trading, adding more alpha to its performance this month.

Inclusive of Monday morning's move, Tesla is 10% higher than the S & P 500 and Nasdaq, which are down 8.2% and 10.3%, respectively. Most of this rally comes on the back of Tesla's sooner-than-expected and much better-than-expected third-quarter earnings results.

The company was significantly more expansive in terms of cash flow and earnings growth than it was expecting, while also growing in revenue growth as it grew 129% year-over-year. That follows Tesla's strong production report for the quarter that was released earlier this month.

All of this said, they are saying they would be willing to take a larger stake in the company. That's what's helping Tesla rise 3.5% to $ 343 in midday Monday trading.

Many may not be aware of Baillie Gifford, but it is one of Tesla's largest shareholders. Specifically, the company owns more than 7.7% of the stock, just behind Fidelity's 12.35% stake. Overall, Musk owns just over 20% of the stock, making Baillie Gifford the second-largest institutional holder and the third largest overall.

So, how are they feeling?

Despite the torn analyst community, Baillie is upbeat. Partly because of CEO Elon Musk 's Vision and Ambition, Nick Thomas, a partner at Baillie Gifford. The latest quarterly figures can not hurt the firm's outlook. "If he needs more capital we would be willing to back him," Thomas said.

Baillie Gifford's willingness to raise its stake in Tesla is not too surprising, given that it's just an 11% stake in electric-vehicle maker Nio (NIO), which recently made its audience debut on the NYSE.

Also, it is a report that Mercedes-Benz parent Daimler (DDAIF) is not exactly aligned with Tesla at some point down the line. While it's clear the automaker is not looking for any other companies, it's worth noting that Daimler owned a 4% stake in Tesla before selling it in 2014.

CEO Dieter Zetsche does not regret selling the position, but said that it "does not exclude a cooperation in a future," when speaking at the Paris Auto Show.

This comes as Mercedes, Porsche, Audi, BMW and others are finally rolling out competitive electric vehicles. The only problem is, despite having years to catch up with Tesla and far larger R & D budgets, they fall below what Tesla's comparative vehicles have to offer in many key categories. In some cases, the specs are comparable and in other cases, they fall short. But one would have thought that Mercedes, Porsche and others would have better performance given the time and financial factors.

As Tesla turned to $ 311 million net profit and generated over $ 880 million in free-cash flow, Tesla has a less-risky entity. Not only for investment purposes, but when looking for a partner to work with. No one wants to work with a partner that's going belly up, right?

Tesla's Supercharger may be one attraction, its technology may be another. For Daimler, we do not know if or why the automaker may want to work with Tesla in the future, but those are a few possibilities down the road.

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