Tesla board evaluating Musk’s idea to take company private

Virginia Carson
August 8, 2018

The shares surged 11 percent to $379.57 on Tuesday after Musk said he's considering taking Tesla private at $420 a share, or an enterprise value of about $82 billion.

One day after Tesla CEO Elon Musk raised the idea that he may take the electric car-maker private, Ford EVP Jim Farley says his company has no issues with being public. "The board has met several times over the last week and is taking the appropriate next steps to evaluate this".

The report came the day after Musk said he was considering taking Tesla private and that funding had been secured, but did not offer any specifics about the unprecedented move.

Teresa Goody, a former SEC official, said Musk "did something inappropriate and caused chaos in the market" in a way that would likely draw scrutiny from investigators. Musk, on Tuesday, announced he was mulling buying the company out for $420 per share.

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Tesla's CEO also laid out what he envisions as the ideal path for going private.

If the content of Musk's tweet was not true, lawyers argue, it could expose Tesla's mercurial chief executive officer and the company to regulatory action and private lawsuits.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday.

At the time of the talks, Tesla was trading at just over $300 a share.

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"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares.

In a later statement to employees and posted on Tesla's blog, Musk explained: "Being public. subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term". That kind of money may be accessible through sovereign wealth funds or other strategic investors, said Dwight Scott, president of Blackstone Group LP's GSO Capital Partners.

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.

In a letter to shareholders after his tweet on Tuesday, Musk fleshed out his idea, suggesting they would get the option to sell their shares for $420 United States each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results.

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"Elon's tone and messaging regarding a potential transaction lead us to believe that there could be significant outside funding lined up", RBC analysts said.

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