Tesla going private? Here's what Elon Musk's tweets mean for investors

Randal Sanchez
August 8, 2018

Musk owns almost 20 percent of the company. But the company has given no details of how such a buyout would work, or if funding is indeed in place. Taking Tesla out at $420 would make that promise true, and put Tesla's funding under less scrutiny.

At first, Tesla had declined comment on Musk's tweet, even as he casually engaged Twitter followers with more posts about his plans. He later tweeted that the only uncertainty about completing the deal is whether he can gain shareholder approval.

At that price, the Tesla transaction would be worth more than US$71 billion.

Elon Musk has "surprised" the market by laying out a tentative plan to privatise the now publicly listed Tesla electric car/solar energy company with a $420 per share price offer.

Last month, he apologised for calling British caver Vernon Unsworth, who helped rescue 12 Thai boys from a cave, a "pedo" - short for paedophile - after Unsworth spoke dismissively of the Tesla chief's proposal for bringing the boys to safety.

Musk is power tweeting about the world's biggest leveraged buyout and the financial markets are full of hot takes.

Tesla on August 1 reported that it had ended the second quarter with $2.78 billion in cash after spending $610 million in capital expenses, while its negative free cash flow narrowed. Although it's unusual for a chief executive to make such a major announcement over social media, it does not appear to be improper.

"Elon Musk doesn't have the financing, and the SEC is going to crush him for it". "This is not how you do it and it makes you wonder how seriously to take it", said Erik Gordon, a business and law professor at the University of MI. "Given his historic frustration with short sellers, analysts and certain parts of the press, it is perhaps also not surprising that he has given consideration to taking the company private", Galliers said.

Camera IconTesla's existing shareholders could be given the option of retaining a stake in the company through a special fund. The email was published on Tesla's corporate blog.

Tesla stock, which was trading at $342, jumped, ending the trading day up 11 per cent at $379.57.

Musk took to Twitter early Tuesday afternoon to raise the prospect of taking Tesla private.

Protesters in Iran attack seminary, break windows
In return, United Nations-approved sanctions were lifted, and Iran was allowed to resume trading oil and gas on the global market. The US administration has vowed to impose sanctions on any company continuing to buy oil from Iran after the November 4 deadline.

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 $US35,000 to appeal to a broader audience.

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 US history, would allow the company to ignore the pressures of the stock market and focus on long-term plans.

On April Fool's Day, amid growing market concerns about Tesla's cash crunch, he had tweeted a fake news release that said Tesla would have to file for bankruptcy.

"Am super appreciative of Tesla shareholders", Musk said.

VideoElon Musk says he wants to make Tesla Inc. a private company. Musk has insisted Tesla has no such need.

Tesla is the most valuable automaker in the United States, and Musk's fights with investors - specifically short-sellers, who profit when the stock drops - are a running Silicon Valley sideshow.

In his letter, Musk suggested a choice for shareholders of selling their shares for $420 each or remaining investors in a private Tesla.

Mr Musk has long raged against short sellers and mentioned his desire to be rid of them as one of his reasons for taking Tesla private. He added that "being public means that there are large numbers of people who have the incentive to attack the company".

Musk said he wouldn't sell his stake if the company went private.

"If he doesn't go forward with it, it will end up be another Elon Mr Musk big mouth faux pas", he said. "People will shake their heads and say, 'that's Elon"'.

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