Elon Musk considers taking Tesla private

Sean Reid
August 8, 2018

In addition to Tesla, he runs private space exploration firm SpaceX and tunnel-building and transit firm The Boring Company. "The stock is worth $570 a share based on 2019 revenue".

Musk did not disclose the source of the funding.

In a subsequent note to employees, Musk said a final decision had not yet been made.

Tesla shares ended the day at $379.57, within reach of their all-time high and more than 5 percent above the bonds' conversion price of $359.8676.

The confusion caused by Mr Musk's Tuesday announcement via Twitter also prompted regulators of the Nasdaq stock market to temporarily suspend trading in Tesla's stock.

Musk has been in a very public battle with these shorts for years. As he 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".

The broader timing of the tweet is also suspect, given Musk's recent public denunciations of Tesla's (equally vocal) critics.

The move could be seen as a way for Musk to gain more control over Tesla, but the CEO says that's not his intent. He said in his letter to employees that he did not seek to expand his ownership.

If the share price rises to the buyout price of $420 and the number of shares sold short does not change, year-to-date paper losses could swell to $4.45 billion, according to S3.

"Our guess is there is a one-in-three chance he can actually pull this off and bring Tesla private", Munster said.

Market cap equals shares of stock times stock price. "We believe that the majority of Tesla's production lines will be ready to produce at this rate by the end of 2018", Musk said during the company's second quarter results last week.

He made no mention in his tweets nor his letter where the funding for a deal would come from, and the letter did not discuss funding for the plan.

The $2.3 billion in debt that investors can now take in equity rather than cash removes pressure from the cash-strapped company which has about $9.5 billion in long-term debt, according to its latest financial statements. Many major Wall Street bankers contacted by Reuters said on condition of anonymity that they were not aware of Musk's plans ahead of his tweets, and several expressed scepticism that a leveraged buyout of Tesla could be financed given the company's negative cash flow.

Tesla is the most shorted company on Wall Street.

Tesla's shares jumped as high as US$371.15 in afternoon trading before trading was halted.

Tesla did not immediately respond to a request for comment. Musk said he will ensure the prosperity of shareholders "in any scenario".

Tesla Motors started selling its stock to the public in 2010 - the first initial public offering of a USA automaker in more than a half-century. "Plus this is short squeeze rocket fuel after a nice quarter", said analyst Chaim Siegel from Elazar advisers.

Disclosure securities experts tell FOX Business that Musk and Tesla complied with the SEC's position on social media released in April 2013 stating: "The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information".

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.

Other reports by

Discuss This Article