Monday, 17 December, 2018

Tesla buyout would need to go short on leverage

Elon Musk says he's considering taking Tesla private | TheHill Elon Musk tweets about going private and shares 'skyrocket'
Andy Castillo | 08 August, 2018, 09:25

Tesla alerted investors in a 2013 SEC filing that they should follow Musk's Twitter feed for "additional information" about the company.

Musk, who has cut a controversial figure on social media and beyond, sent the financial world abuzz again around 1650 GMT, tweeting, "Am considering taking Tesla private at $420".

That left the market capitalisation of Tesla, which has been experiencing production difficulties and recently asked suppliers to refund some payments, at around $64bn.

One investor, the CEO of Gerber Kawasaki Wealth & Investment Management, Ross Gerber, said he had "no intention" of selling his shares at $420.

Tesla chief executive Elon Musk is gearing up to lead a buyout of the electric auto maker in a stunning move that would end the maverick company's eight-year history trading on the stock market. A price of $420 a share would value the company at $72 billion, nearly double Ford.

They first rose above the conversion price in June 2017 and Tesla's stock price hit a record high of $389.61 in September previous year.

Around 4AM AEST on Wednesday, trading of Tesla shares was halted for "pending news". Following Musk's initial tweet trading in Tesla Inc was briefly suspended, but ended at $380 (£296) a share, which was close to a record high. (Easy come, easy go.) More importantly, were Musk able to take Tesla from a publicly to privately owned company, Tesla would be worth about $71 billion, roughly the same as century-old Daimler, parent of Mercedes-Benz.

What on earth is happening to Tesla stock today? "I'd like to apologize for, you know, being impolite on the prior call", he said.

In a subsequent note to employees, Musk said a final decision had not yet been made.

"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla", Musk said Tuesday in an email to employees.

"Once Tesla enters a phase of slower, more-predictable growth, it will likely make sense to return to the public markets", he wrote.

Musk complained that Tesla is "the most shorted stock in the history of the stock market" and many people "have the incentive to attack the company".

'It was just mayhem': Aussie tourist reveals quake terror in Indonesia
He told Sunrise they were also in a Bali last week when the 6.4 magnitude quake struck but said this one felt a lot bigger. Thousands of homes and buildings were damaged. "Lots of cracks, fallen doors".

"I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we're all trying to achieve", he wrote.

Tesla doesn't meet the typical profile of a company that can raise tens of billions of dollars of debt.

Mr. Musk could also face scrutiny by the U.S. Securities and Exchange Commission if his tweet turned out to be a joke. Dan Primack of Axios tweets: "One of two things is true right now: Elon Musk has quietly pulled a huge coup, and secured enough financing to buy his company at a premium. 2".

"Elon Musk is a very unconventional communicator".

Elon Musk just added $900 million to his fortune. Musk also pointed this out in his letter. SpaceX is a ideal example: it is far more operationally efficient, and that is largely due to the fact that it is privately held.

Musk added that the goal is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures. "The 16 per cent premium to the current share price may not be high enough to incentivize existing shareholders to support the sale".

The buyout is "highly unlikely", said Joel Levington, analyst at Bloomberg Intelligence. Netflix stock moved higher as a result. By going private, Tesla's solar market performance will be become even harder to track.

"Unfortunately, if they do go private we're never going to see what happened", Mond said.

Musk is leaving it to shareholders to decide if they want Tesla to privatize.

Tesla shares have been on the upswing since it reported on August 1 a bigger-than-expected second-quarter but signalled that it expects to reach profitability in the third quarter and remain in the black for the foreseeable future.

Despite the unfolding media "shitshow", Musk still seems to view privatization as an "enormous opportunity for us all".

This story is developing.

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