CAN ELON MUSK REALLY TAKE TESLA PRIVATE

• 08.07.18
• 0CAN ELON MUSK REALLY TAKE TESLA PRIVATE?

AMONG THE HEADS of publicly traded companies, Tesla’s Elon Musk might just be the most whimsical, the most impish, the most delightfully troll-y. But Musk may be ready to give up that distinction. On Tuesday afternoon, the electric carmaker CEO tweeted that he was considering taking the company private, and that he had secured funding to do so.

The proposed $420 per share price is abou
t 20 percent above Tesla’s Tuesday morning share price, though shares immediately soared more than 6 percent following the tweet. The move would value the company at more than $70 billion, and would be the largest take-private transaction in US history. But “420” is also, trololol, slang for marijuana, leading investors, shareholders, and intrigued market spectators to wonder: Is this guy for real?

The answer appears to be yes. Tesla later posted on the company blog a letter Musk sent to all Tesla employees. In it, the CEO explained his rationale, calling stock price swings a “major distraction for everyone working at Tesla.” He wrote that quarterly targets force the company to prioritize the short-term over the long-term. “Finally,” he wrote, “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.”

Trading in Tesla shares was halted for more than 90 minutes, before resuming around 3:45 pm ET. They finished the day up 11 percent.

If Musk is serious about going ahead with a Tesla take-private transaction, he has a long road in front of him. He would need to negotiate with his board for a buyout offer, and then win at least 51 percent approval in a shareholder vote. Musk tweeted that his “hope is all current investors remain with Tesla even if we’re private.”

Musk owns about 20 percent of Tesla shares, and so would need to line up considerable financing to acquire the rest of the company. That would not be simple. The Wall Street Journal reported that a deal would be more than twice as large as the prior largest private buyout, of Energy Future Holdings Corp., formerly TXU Corp. That Texas utility went private in 2007, and filed for bankruptcy in 2014. The banks that issue loans to finance such deals typically want a steady cash flow. Tesla is unprofitable and its cash flow has been erratic.