Tesla board confirms Elon Musk's buyout plans

Cornelia Mascio
Agosto 8, 2018

"Last week, Elon opened a discussion with the board about taking the company private", according to a statement from several board members.

Ford Executive Vice President Jim Farley on the benefits of being a public company after Tesla CEO Elon Musk tweeted he is considering taking his company private.

Rather, it was attributed to Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch. 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.

In the last week, Tesla's board has met "several times" to discuss Musk's proposal and "is taking the appropriate next steps to evaluate this".

The issue of share accumulation by outsiders emerged only recently as reports that Saudi Arabia's public investment fund had built up a stake from 3 to 5 percent after its offers of purchase of new shares in Tesla were spurned by the company.

Shares rocketed up 11 percent after Musk's grand reveal Tuesday, with some expecting they would hit $420 - the price Musk had promised shareholders would receive once the company had finalized its go-private transformation.

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. And as the stock price has climbed this year, so too have the bets against it. 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.

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 of debt and its bonds are rated junk by credit ratings agencies. That last part is important, because Tesla's going to need a lot of it. The transaction would amount to the largest leveraged buyout - in which a company borrows money to repurchase shares and exit the public market - of all time.

The key question following Musk's Tuesday tweet-storm was whether current investors, as represented by the board of directors, were interested in such a proposal.

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