Tuesday, 14 August, 2018

Turns Out Musk Might Actually Be Serious About Taking Tesla Private

Elon Musk Elon Musk
Kenneth Drake | 08 August, 2018, 09:24

It would cost about $71 billion to take Tesla private at $420 per share. In a Bloomberg report following the tweet, the publication quoted Musk as having said in 2015, "There's a lot of noise that surrounds a public company and people are constantly commenting on the share price and value.Being public definitely increases the management overhead for any given enterprise". At $420 per share, a deal would be worth $72 billion overall.

Musk did not disclose the source of the funding.

In a blog post on Tesla's website, Mr. Musk said taking Tesla private, in what analysts expect could be the largest leveraged buyout in USA history, would allow the company to ignore the pressures of the stock market and focus on long-term plans.

Tesla shares closed up 11 per cent at US$379.57, slightly below their all-time high.

Only Toyota and Volkswagen would be worth substantially more than Tesla, which is now the world's fifth biggest automaker by market capitalization. But the company has given no details of how such a buyout would work, or if funding is indeed in place.

Musk and his luxury automaker have been under huge pressure to overcome repeated delays and deliver on promises of producing 5,000 of Tesla's more affordable Model 3 cars per week.

The broader timing of the tweet is also suspect, given Musk's recent public denunciations of Tesla's (equally vocal) critics. This is not to say that it will make sense for Tesla to be private over the long-term. Or part of a conspiracy to save a failing company as the FUD headlines are exalting, sidestepping the responsibility that comes with owning a public company? He said in his letter to employees that he did not seek to expand his ownership. A price of $420 a share would value the company at $72 billion, nearly double Ford.

Munster figures that there is a one-in-three in chance that Musk "can actually pull this off and bring Tesla private". The California vehicle maker has burned through US$1.8-billion in the first half of 2018 and is among the most-shorted stocks on the USA markets.

Musk, who has depicted the quest to build up no-emissions electric cars as an environmental mission, said he viewed going public as "the best path forward", but that a final decision had not been made and ultimately rested on shareholder support.


The CEO claimed that the funding to take the automaker private at $420 per share was "secured".

Raising both the debt and equity required for such a deal would be a challenge.

Tesla shares jumped after a tweet from Musk's verified Twitter account that mentioned taking the company private at a $420 per share price.

At the time, Tesla shares were trading at about $360 per share and went as high as $371.15 before giving back gains later in the afternoon.

China's Tencent Holdings, which took a 5 percent stake in Tesla past year, is another possible partner. Musk said he will ensure the prosperity of shareholders "in any scenario".

In fact, Tesla has turned a narrow profit in only two quarters since it became a public company in 2010.

Nevertheless, the company's shares were up 6.5 percent at $363.46 shortly after the announcement.

Short interest in Tesla on Monday stood at almost US$12 billion, equivalent to 28 per cent of its float, according to S3 Partners, a financial analytics firm. He said wild swings in the stock price are a "major distraction" to workers and that being public "puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term".

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