Tesla board weighs CEO's buyout bid as questions swirl

09 August, 2018, 09:08 | Author: Martin Tyler
  • Flags fly over the Tesla Inc. Gigafactory 2 which is also known as RiverBend a joint venture with Panasonic to produce solar panels and roof tiles in Buffalo New York

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. The SEC declined to comment.

Making money has proven elusive for Tesla while it has been investing in electric auto technology and ramping up production of its vehicles, including a sedan with a starting price of $35,000 to appeal to a broader audience.

There is no evidence this was Musk's intention with his remarks on Tuesday. Tesla lost another $717.5 million in its most recent quarter.

Morgan Stanley analyst Adam Jonas questioned Musk's method for disclosing the move, as well as the $420 per share price point, which is well above Tesla's all-time high.

Musk is CEO and chairman of Tesla. If Musk were to take his company private, analysts say the value of the company would jump to $82 billion.

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The SEC is also reportedly looking into whether Elon's use of Twitter constituted sufficient disclosure.

"Am considering taking Tesla private at $420".

Musk didn't expand on what he meant by the tweet on Twitter but he did send out an internal memo to employees to explain the rationale behind the tweet highlighting three main reasons behind his intentions.

One of the biggest questions surrounding the buyout is Tesla's long history of losing money while it has been investing in electric auto technology and ramping up production of its vehicles.

Musk also made mention of the "shorts", investors who bet against Tesla succeeding in order to profit themselves.

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Just last week, he revealed he had been working 110 hours a week to deliver on short-term promises he had made to Wall Street, a load he traced to his boorish behaviour toward two analysts earlier this year. "I am not sure it is beating him down, but I am sure he is sick of it".

Public companies have four days to report certain material events that shareholders should know about to the US Securities and Exchange Commission.

SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's self-driving unit, Cruise, Reuters reported earlier on Wednesday. This included discussing how being a private company could better serve Tesla's long-term interests.

Munster estimates Musk will need US$25b to US$30b to buy out all the Tesla shareholders who want to sell at US$420.

Net net, Rusch reiterates an Outperform rating on Tesla shares, with a price target of $385, which represents a slight upside potential from current levels.

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Tesla's board on earlier on Wednesday said it was evaluating taking the company private, which would be the biggest leveraged buyout of all time.

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