Published: Wed, August 08, 2018
Business | By Pearl Harrison

Tesla board confirms it will consider Musk's privatization plan

Tesla board confirms it will consider Musk's privatization plan

The eccentric Musk announced the bombshell move Tuesday on Twitter, writing that he had secured funding to buy Tesla Inc.'s shares at $420 each.

Even for Musk, who is famous for firing out controversial tweets, Tuesday's message about possibly taking Tesla private astounded the Internet.

While Tesla's board of directors might approve Musk's idea of taking the automaker private, current shareholders have the final say.

Elon Musk and Masayoshi Son held talks a year ago about SoftBank Group Corp. investing in Tesla Inc., including potentially taking the electric carmaker private, according to two people with knowledge of the discussions.

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.

Some Wall Street analysts were skeptical of Musk's ability to gather the huge financial backing to complete such a deal, given that Tesla loses money, has $10.9 billion (8.5 billion pounds) of debt and its bonds are rated junk by credit ratings agencies. Musk owns about 20 per cent of the Palo Alto, California, company's stock, so that likely would reduce the cost of the buyout.

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


China's Tencent Holdings Ltd, which took a 5-percent stake in Tesla previous year, could also be a possible partner.

"Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible".

Tesla stock opened at $369.09 on Wednesday, sliding almost 3 percent from its Tuesday closing price of $379.57. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk".

Some on Wall Street shared that view.

"It's very hard to put leverage on this company", due to its negative cash flow and "operational issues", Scott said Wednesday on Bloomberg Television.

Former SEC chair Harvey Pitt told CNBC that while the United States stock market regulator permits executives of publicly listed companies to use social media to make statements about their businesses, Musk's tweet was still "highly unprecedented". Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.

A statement was issued by six members of the electric carmaker's board after Mr Musk tweeted to say he had the funding to de-list the company. Rather, it was attributed to Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch.

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