Published: Thu, August 09, 2018
Markets | By Jeffery Armstrong

Elon Musk Explains Why He's Thinking of Making Tesla Private

Elon Musk Explains Why He's Thinking of Making Tesla Private

But if the buyout flops, Musk and Tesla will likely face class-action lawsuits from shareholders alleging they were duped, and potential legal trouble from the Securities and Exchange Commission, too.

A Tesla spokesperson declined to comment.

His tweet on Tuesday that he was considering taking the company private, and had secured funding to do so at $420 a share, sent the stock surging, as investors salivated over the potential $72bn (£53bn) deal.

In his typically controversial fashion, Tesla (NASDAQ:TSLA) CEO Elon Musk dropped a bombshell on his Twitter account, which he has used as a platform for pranks, vitriol and now for a proposal to pull off one of the biggest buyouts in USA history. The SEC has previously ruled that using social media to disclose company news is OK, as along as investors have been told that those channels may be used.

Musk is CEO and chairman of Tesla.

Musk tweeted on Tuesday that he would like to leave public markets at $420 per share - a 20% upside to their price that day.

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"Who gives $30 to $50 billion to buy back the shares?" asked NordLB analyst Frank Schwope.

In a Wednesday research note, Morgan Stanley analyst Adam Jonas estimated Tesla will end up taking on about US$50b in additional debt if the company goes private.

Six of nine members said in a prepared statement Wednesday that Musk began talking with the board about the move last week.

SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's self-driving unit, Cruise, Reuters reported earlier.

"If Apple wanted to be in the auto business, this is how you do it-you step up, doesn't have to be $420 (per share), it could be another price". 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.

The deal would be the biggest leveraged buyout of all time, beating the $45 billion record set by Texas power utility Energy Future Holdings.

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SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's self-driving unit, Cruise, Reuters reported earlier on Wednesday. Bloomberg News, which first reported on that meeting, said the talks failed to progress due to disagreements over ownership. "How could Tesla possibly fund such a large transaction?"

Tesla released a statement Tuesday, which was emailed to employees hours earlier, laying out how and why the automaker would go private.

He said that would allow Tesla to "operate at its best, free from as much distraction and short-term thinking as possible".

By taking Tesla private, Musk believes that the company will be able to sharpen its long-term focus of revolutionising an automobile industry dominated by fuel-combustion vehicles without having to cater to investors' fixation on how the business is faring from one quarter to the next.

Mr Korus said he would need more details from Mr Musk to judge whether a buyout offer would be practical and at what price it would be attractive.

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