Published: Wed, August 08, 2018
Finance | By Loren Pratt

Doubts grow over Elon Musk’s master plan to take Tesla private

Doubts grow over Elon Musk’s master plan to take Tesla private

Tesla directors have said they knew about Elon Musk's surprise proposal to privatise the money-losing auto maker before he tweeted about it and have met several times in the past week to discuss the proposal.

Tuesday, Twitter and most of the rest of the internet freaked out over news that Elon Musk wanted to take Tesla private at $420 per share. Later in the day it became clear that Musk was in fact serious about the bid to take Tesla private when Tesla published a blog post in Musk's name addressed to all employees and when Musk tweeted that he had already lined up the funding for such a move.

The board had "met several times over the last week" to discuss going private, the statement said.

"Distraction or not, the move feels right even if Musk is downplaying how supportive public markets have been".

Elon Musk disrupted multiple industries on Tuesday when the Tesla CEO [NYSE: TSLA] took to Twitter to float the idea of taking the Silicon Valley automaker private.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday.

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares.

JPMorgan analyst Ryan Brinkman said he gave only a 50 per cent probability that Tesla would go private.

The stock is far below the $420 price at which Musk said shareholders would be bought out. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk". And as the stock price has climbed this year, so too have the bets against it.

A statement was issued by six members of the electric carmaker's board after Mr Musk tweeted to say he had the funding to de-list the company. "Finally, 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".

"Last week, Elon opened a discussion with the board about taking the company private", the board members wrote.

Former SEC chair Harvey Pitt told CNBC that while the USA stock market regulator permits executives of publicly listed companies to use social media to make statements about their businesses, Musk's tweet was still "highly unprecedented".

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