Tesla board evaluating Elon Musk's proposal to take company private

08 August, 2018, 21:28 | Author: Brooke Harris
  • Source Getty

Ford Executive Vice President Jim Farley on the benefits of being a public company after Tesla CEO Elon Musk tweeted he is considering taking his company private.

Musk has 22.3 million followers on Twitter, and Tesla's share price was already rising after the Financial Times reported that Saudi Arabia's sovereign wealth fund had taken a $2bn stake in the company.

Most analysts were skeptical, but some said a deal could materialize if Musk succeeded in lining up the right funding. The statement did not address how the $420-per-share price was established.

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.

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

Tesla's shares were down less than one per cent at $376.31 USA in morning trading on Wednesday after closing up 11 per cent at $379.57 U.S. on Tuesday. 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.

But as the dust settles on Musk's latest Twitter escapade, questions remain over whether the Tesla chief executive broke SEC guidelines by tweeting the news.

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Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.

The deal would be the biggest leveraged buyout of all time, beating the $45-billion record set by Texas power utility Energy Future Holdings.

His message followed a report that a Saudi investment fund had taken a almost 5% stake in Tesla. That last part is important, because Tesla's going to need a lot of it. "I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible".

Some on Wall Street shared that view.

On Wednesday, Tesla's board said it was evaluating the proposal. "Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company".

Musk's proposed move is seen as a strategy to avoid several issues: Wild stock swings, short-sellers who profit on stock value drops and shareholder pressure on quarterly performance, according to the Financial Times.

Names excluded from the board statement were Musk; his brother, Kimbal Musk; and Steve Jurvetson, a venture capitalist and early Tesla backer who's been on leave since a year ago.

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