Monday, 20 August, 2018

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

Danny Moloshok  Reuters Danny Moloshok Reuters
Nellie Chapman | 08 August, 2018, 21:29

Tesla's shares were down 2.1 percent at $371.70 on Wednesday after closing up 11 percent on Tuesday.

Musk, who has had a contentious relationship with Wall Street analysts, and short-sellers who bet against his stock, tweeted on Tuesday that he could take the company private at $420 per share-but Farley said a company doesn't necessarily run better if it's out of the public eye.

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 USA each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results. "This is out there, even for Tesla", analysts with Barclays wrote Wednesday.

In a release, board members Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch said Musk opened the discussion last week.

Tesla said on Wednesday the discussions had addressed the issue of how to fund such a deal, but gave no details.

In the last week, Tesla's board has met "several times" to discuss Musk's proposal and "is taking the appropriate next steps to evaluate this".

Earlier this week, Tesla CEO Elon Musk announced out of the blue - and on his preferred social media platform - that he was considering taking Tesla private at $420 a share.

In subsequent tweets, Mr. Musk said that going private would end "negative propaganda" from short sellers. The talks covered both the reasons for doing so - which Musk also laid out in an email to employees that was subsequently posted online - as well as the funding.

The issue of share accumulation by outsiders emerged only recently as reports that Saudi Arabia's public investment fund had built up a stake from 3 to 5 percent after its offers of purchase of new shares in Tesla were spurned by the company.

It's possible Musk could persuade some large institutional investors to remain shareholders in the private company, which could reduce his funding needs, Sacconaghi said. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk".

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.