Tesla board evaluating Elon Musk's proposal to take company private

Tesla board evaluating Elon Musk's proposal to take company private

In a letter to shareholders after his tweet on Tuesday, Musk fleshed out his idea, suggesting they would get the option to sell their shares for $420 U.S. each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long term. "This included discussion as to how being private could better serve Tesla's long-term interests, and also addressed the funding for this to occur".

Tesla has moved to further formalise the prospect of the electric auto company undergoing a buyout with a statement from the company's directors. The shares surged 11 percent to $379.57 on Tuesday after Musk said he's considering taking Tesla private at $420 a share, or an enterprise value of about $82 billion.

In a statement on Tesla's website bit.ly/2vJiaMm, 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". This proposed route would also keep all Tesla employees as shareholders/investors in the company, while Tesla would adopt an ownership and governance structure similar to the current form of SpaceX.

Musk owns an nearly 20 per cent stake in Tesla, meaning he'd still need roughly $70 billion in financing to take Tesla private.




The oil-rich kingdom of Saudi Arabia's investment fund has gobbled up a multibillion-dollar stake in the company in recent months, the Financial Times reported Tuesday, but Tesla has not answered questions about the involvement of the kingdom, or anyone else, in how he would finance the company's exit from public markets.

Several securities attorneys told Reuters that Musk could face investor lawsuits if it was proven he did not have secure financing at the time of his tweet. "I own about 20 percent of the company now, and I don't envision that being substantially different after any deal is completed", Musk added.

China's Tencent Holdings Ltd (0700.HK), which took a 5 percent stake in Tesla past year, could also be a possible partner. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot. In his first tweet he said funding was secured but provided no details. "This is out there, even for Tesla", analysts with Barclays wrote Wednesday. Tesla is a legendary cash-burner, with roughly $10 billion in debts and $2 billion in reserves, and Musk would probably need in the tens of billions of dollars to buy out shareholders at the right price.

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

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