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

Devin Lawrence
August 8, 2018

Tesla stock opened at $369.09 on Wednesday, sliding almost 3 percent from its Tuesday closing price of $379.57. This included discussing how being a private company could better serve Tesla's long-term interests. According to the WSJ report, as well as others slowly trickling out of Twitter's financial corner, the SEC is looking into whether or not Musk was telling the truth when he said he'd already secured financing to take the company public.

Tesla Inc.'s board confirmed it knew last week about Elon Musk's proposal to take the electric-car maker private, adding credence to the idea that this was more than a spur-of-the-moment whim from the notoriously impulsive billionaire.

Tesla shares fell as much as 3.4 per cent to US$366.52 before the start of regular trading, though they pared declines after the board statement. Musk's money-losing and cash-burning company is an unlikely candidate for debt investors to be willing to help go private.

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

Former SEC chair Harvey Pitt told CNBC that while the United States 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". Musk owns about 20 percent of the Palo Alto, California, company's stock, so that likely would reduce the cost of the buyout.

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However, it certainly looks like his messages on social media have had direct consequences on Elon Musk's personal fortune, and on his company's stock price: Tesla shares started Tuesday trading at about $340 and went as high as $387.

The company has only posted a quarterly profit twice in its history and has never made money during an entire calendar year, something that Musk has been trying to change by cutting costs, including recent mass layoffs that trimmed Tesla's workforce by 9 percent.

If the content of Musk's tweet was not true, lawyers argue, it could expose Tesla's mercurial chief executive officer and the company to regulatory action and private lawsuits.

The whole thing isn't yet set in stone because it must be put to a shareholder vote. If the statement regarding having secured the funding for the move later proves unachievable, then Musk could be in hot water with regulators over the statements that he first made on Twitter.

SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's (GM.N) self-driving unit, Cruise, Reuters reported earlier on Wednesday. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk". The move is estimated to require north of $50 billion to buy out the public shareholders.

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