Friday, 17 August, 2018

Tesla board confirms it will consider Musk's privatization plan

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 Tesla board mulls de-listing plan
Ginger Lawrence | 08 August, 2018, 21:24

Tesla Inc Chief Executive Officer Elon Musk'splan to take the electric vehicle maker private raised doubts among Wall Street analysts about the billionaire' s ability to gather enough financial backing to complete the deal.

Board members said that Tesla boss Elon Musk and had held several meetings about the move in the past week.

Rather, it was attributed to Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch. The board said only that Musk had "addressed the funding for this to occur". The board, they said, had met "several times" over the last week and was actively working to "evaluate" the proposal.

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. But after the markets opened Wednesday morning, Tesla's stock edged downward about 1 percent, to $375. The company declined to comment beyond pointing to an all-employee email sent Tuesday by Musk.

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It's possible Musk could persuade some large institutional investors to remain shareholders in the private company, which could reduce his funding needs, Sacconaghi said. "At risk, of course, is that anything short of a formal take-private offer could trigger lawsuits from burned short-sellers, or at worst, public pressure to remove Musk as CEO". The move would also foreclose the option of selling more stock to raise cash every year, a move which Musk has disfavored in recent years. That last part is important, because Tesla's going to need a lot of it.

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.

"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30. Company share prices, particularly in deals as giant as this one, are nearly always decided by corporate executives, board members or consultants who review market data and optimize for maximum value.

The statement was not from the company's full board of directors.