Tesla shares dip after Elon Musk proposes going private

08 August, 2018, 22:48 | Author: Sally Reid
  • Tesla board mulls de-listing plan

Elon Musk has faced a barrage of criticism recently and his electric vehicle company Tesla has been taking a pounding from critics.

At the time of the talks, Tesla was trading at just over $300 a share.

The statement says Musk "addressed the funding for this to occur" in the conversations.

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. "That sense of the market, investors-so critical for a company like Ford".

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

The statement, issued by six of Tesla's nine-member board, suggests Musk's controversial tweets, which led to the company's stock being suspended from trading for a time on Tuesday, were less spontaneous than originally believed and not designed simply to punish Tesla stock short-sellers.

Trump vows to impose tariffs on more Chinese goods
But within days, Trump himself backed away from the deal, saying talks would "probably have to use a different structure". The two sides held three rounds of formal talks, beginning with a delegation to Beijing led by Mnuchin in May.

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.

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.

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares. "I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, and where there is as little change for all of our investors, including all of our employees, as possible".

Bloomberg's Selina Wang and Giles Turner reported that Musk and Son failed to reach an agreement over the structure of the company, citing sources.

In a later statement to employees and posted on Tesla's blog, Musk explained: "Being public. 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". That will certainly drop the price of going private, as will the fact that Musk himself owns about 20 percent of Tesla, a number he sees as staying firm after the company is no longer public.

Other board members mentioned in the statement included Robyn Denholm, Ira Ehrenpreis, Antonio Gracias and Linda Johnson Rice. Tesla's other board members are Musk, his brother Kimbal Musk and venture capitalist Steve Jurvetson.

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