Tesla shares dip after Elon Musk proposes going private

Tesla and SpaceX CEO Elon Musk at a SpaceX press conference in Cape Canaveral Fla. on Feb. 6 2018. More

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.

Investors were not too bothered by this lack of clarity: Tesla's shares jumped 11 per cent.

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.

In a statement on Tesla's website on Wednesday, six of Tesla's nine directors said the board had met several times over the last week to discuss such an idea and was "taking the appropriate next steps to evaluate this".

Mr Musk said in his tweet on Tuesday that shareholders would be offered $420 (£326) per share, valuing the business at more than $70bn.

But can Musk really strike a deal?

The move to take the company public would remove Musk, who himself has a 20 percent stake, from the public arena - and contentious criticism.

Musk hasn't been quiet about his disdain for short sellers.

Musk has some sensible reasons for going private.

It's unclear who Musk secured funding from.

Lawyers said every word of Musk's tweets will be examined, including why he used words like "considering", to determine whether he might have tried to inflate the stock price to blow out short-selling investors, a longtime foe.

But the biggest motivator for Musk in taking the company private is viewed as the freedom to pursue larger long-term goals instead of short-term financial ones, and this includes his view of Tesla as one of the pieces in a larger puzzle that includes homeowner-controlled energy trading, solar energy accumulation and storage, and autonomous electric trucking.

Tesla may find it hard to line up banks and investors to lend it large sums.

The Tesla board responded to the proposal earlier Wednesday morning, indicating that it is evaluating things.

One Tesla shareholder said he thought a deal to take Tesla private was doable. Shareholders would also have to be willing to potentially get less information about the company's performance and have less opportunity to sell their shares if it is no longer publicly traded. "How could Tesla possibly fund such a large transaction?"

That's debatable. The new tax rules enacted by Congress past year could be bad news for Tesla. The company would also rid itself of the "shorts" that have plagued Elon on Twitter and elsewhere - investors who bet against the company's success in order to profit themselves. The statement did not address how the $420-per-share price was established.

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.



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