Here's what taking Tesla private means for the company and Elon Musk

09 Agosto, 2018, 09:07 | Author: Arnold Perez
  • Flags fly over the Tesla Inc. Gigafactory 2 which is also known as RiverBend a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo New York

Canadian businessman and "Shark Tank" television personality Kevin O'Leary opined on the tweet that sent capital markets spinning yesterday when Tesla co-founder and CEO Elon Musk announced the idea of taking the Palo Alto, California-based company private.

He has not provided details or evidence of the funding by Twitter or in a following blog posted on the Tesla web site, and several securities attorneys told Reuters Musk could face investor lawsuits if it was proven he did not have secure financing at the time of his tweet.

According to Musk, taking the company private would remove the scrutiny from analysts that, he says, encourages short-term thinking. Musk tweeted on Tuesday that he was considering a buyout plan at $420 per share, or 22% above Tesla's opening price that day and still almost 14% more than its opening quote on Wednesday.

Musk later elaborated in a letter to Tesla employees saying that he was exploring the option.

In his typically controversial fashion, Tesla (NASDAQ:TSLA) CEO Elon Musk dropped a bombshell on his Twitter account, which he has used as a platform for pranks, vitriol and now for a proposal to pull off one of the biggest buyouts in United States history.

Also on Tuesday, the Financial Times reported that Saudi Arabia's public investment fund - a major backer of SoftBank's fund - had invested roughly $2 billion in Tesla for a stake representing 3% to 5% of the company.

Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.

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The board had "met several times over the last week" to discuss going private, the statement said.

If we turn to the Street in general, we can see that Wall Street has a neutral point of view on Tesla, with TipRanks analytics exhibiting TSLA as a Hold.

Musk's plan for a price of $420 a share would value a deal at more than $70 billion. However, they may balk if Tesla becomes even more leveraged and risky in the process of going private. That report had already partly lifted Tesla's stock.

Mr Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.

Bloomberg's Selina Wang and Giles Turner reported that Musk and Son failed to reach an agreement over the structure of the company, citing sources.

Names excluded from the board statement were Musk; his brother, Kimbal Musk; and Steve Jurvetson, a venture capitalist and early Tesla backer who's been on leave since a year ago.

Investors have also questioned why the maneuver was not listed in a 69-page SEC filing, submitted last week and released Monday, that provided intricate detail of Tesla's financial outlook and coming events.

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