Tesla board says Musk started going-private talks last week

Andrew Cummings
August 8, 2018

Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla's valuation higher than that of General Motors Co.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday.

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.

"Given the haphazard process of disclosure last afternoon, our initial impression was that Elon Musk sprung his plan of going private upon the public without consulting Tesla's board of directors or major shareholders", Bernstein analysts said in a note titled "Going private?"

Mr. Musk on Tuesday proposed taking Tesla private at $420 a share, about 11% higher than the day's closing stock price.


Investors must now weigh whether giving even more freedom to Musk, and the extra debt the deal may incur, is worth it.

Earlier this week, Tesla CEO Elon Musk announced out of the blue - and on his preferred social media platform - that he was considering taking Tesla private at $420 a share. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.

"Only reason why this is not certain is that it's contingent on a shareholder vote", Musk said in one tweet. "The board has met several times over the last week and is taking the appropriate next steps to evaluate this".

But the board offered no further details of the proposal or its funding, sparking new questions about the feasibility of the master gambit Musk revealed in a surprise series of midday tweets on Tuesday. None of those firms would comment about Musk's proposal, but it's not clear that every investor would be on board. The board said only that Musk had "addressed the funding for this to occur". "If the process ends the way I expect it will, a private Tesla would ultimately be an enormous opportunity for all of us". Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot.

Would Tesla perform better as a private company?


Some companies have indeed done better after going private (though there are plenty of examples of those that have gone on to flounder).

Tesla stock closed Tuesday at $379.57. "These guys want us to die so bad they can taste it", he said past year.

Some Wall Street analysts were skeptical of Musk's ability to gather the huge financial backing to complete such a deal, given that Tesla loses money, has $10.9 billion (8.5 billion pounds) of debt and its bonds are rated junk by credit ratings agencies.

Some on Wall Street shared that view.

It's also unclear how Musk came up with the $420 price.


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