Tesla shares dip 3 percent after Musk abandons buyout

Devin Lawrence
August 28, 2018

Investors on Monday will render their verdict on Tesla Chief Executive Elon Musk's decision to abandon a proposed $72 billion buyout to take the luxury electric auto maker private. He said he had expected a challenging process to take Tesla private, but concluded that "it's clear that it would be even more time-consuming and distracting than initially anticipated".

Volkswagen was one of the companies lined up to contribute funding to take Tesla private, according to a report from The Wall Street Journal. Several investors have also sued Tesla, alleging that Musk's announcement was meant to manipulate the price of the company's stock. It was reported that Musk also became wary of the strings attached to taking cash from the Saudi sovereign wealth fund, which he said expressed both the interest and ability to fund his buyout. "W$3 ith every blog post and with every statement since his initial tweets we have seen admissions from Mr. Musk that basically there was no reasonable basis to believe his tweets were true".

At the time, Musk said funding had been secured, though he later revealed in a blog post that there was no concrete deal in place and, in fact, he was still open to talking with other investors. In addition to its interest in Tesla, the Saudi sovereign wealth fund is considering an investment in aspiring US electric-car maker, Lucid Motors Inc., one of the people said. "Public companies need more details about these things and you can't make them up". "Although the majority of shareholders I spoke to said they would remain with Tesla if we went private, the sentiment, in a nutshell, was "please don't do this".

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Musk had hired advisers including Goldman Sachs Group Inc. and Silver Lake as well as Morgan Stanley. Leaving ownership as is puts the scrutiny back on Musk's all-consuming work style, the company's tricky cash position, its ability to meet mass-market production goals, and the independence and oversight of Tesla's board.

Musk also said the company "absolutely must stay focused on ramping Model 3 and becoming profitable".

The SEC investigation and investor lawsuits related to the whipsawing stock will at minimum continue to divert management's time from operations, Joel Levington, a senior credit analyst with Bloomberg Intelligence, said in a note Saturday.

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