Tesla's board seeking more information on Musk's financing plan

Andrew Cummings
August 12, 2018

On Thursday, Aug. 9, Tesla shares have dropped back to near the level they were trading at before Musk tweeted Tuesday that he may take the company private.

The hedge funds betting on a slump in the Tesla share price are holding their nerve amid mounting scepticism that Elon Musk can muster the $82 billion he will need to take it private.

Mr Musk said he was considering taking the loss-making electric carmaker private at US$420 (S$573) a share, which would value a deal at more than US$70 billion.

The SEC already has opened an inquiry into the wording and method of Musk's disclosure about the deal, according to a Wednesday report in The Wall Street Journal, which cited unidentified people familiar with the matter.

Musk acknowledged he was serious in an email to employees, and Tesla directors have said they're evaluating it. Now, as the board's announcement has gone out that it would actually consider the possibility of going private, the stock has again begun to jump up in again in after-hours trading.

Bloomberg on Thursday afternoon confirmed the paper's report and said the federal securities regulator had been looking into Tesla's public statements before the tweet.

Tesla said on Wednesday the discussions had addressed how to fund such a deal but gave no details.

Musk's recent Twitter musings about taking Tesla private may have been an expression of his particular sense of humor. Tesla did not respond to requests for comment.

Elon Musk, CEO of SpaceX and Tesla, is facing some backlash after calling a British diver involved in the Thai cave rescue a 'pedo'.

"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 noted.

News of the potential buyout already has stung investors known as "short sellers" who have always been a thorn in Musk's side.

It now has a market value of $61 billion, and at a share price of $420, the company would be worth around $71.6 billion.

"As long as it's an option for me to invest my money alongside Elon, I'm going to", said James Stephenson, who says he has been a Tesla investor since 2014. And if I learned one thing in my 13 years as a public company CEO, it is that a peer group comparable company analysis is the oxygen that mutual fund managers breathe.

Some on Wall Street shared that view. Tesla's stock backtracked by more than 2 percent to close at $370.34.

In turn, an internal Tesla market could encourage smaller investors to hold onto their stock, lowering the amount of money, which could be tens of billions, that Musk must raise for the buyout. That will make it more hard for companies to carry heavy debt loads - and taking Tesla private would means taking on a great deal of debt.

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