Published: Wed, August 08, 2018
Economy | By Shawn Conner

Tesla board says Musk started going-private talks last week

Tesla board says Musk started going-private talks last week

As Tesla's board of directors rallied Wednesday behind chief Elon Musk's extraordinary push to take the all-electric automaker private, a growing contingent of investors, analysts and former regulators voiced their doubts that the deal would ever take off.

Musk also made mention of the "shorts", investors who bet against Tesla succeeding in order to profit themselves.

Bernstein analyst Toni Sacconaghi said Musk's statements puts Tesla under pressure to detail how it intends to proceed with the deal to go private.

"This included discussion as to how being private could better serve Tesla's long-term interests, and also addressed the funding for this to occur".

Teresa Goody, a former SEC official, said Musk "did something inappropriate and caused chaos in the market" in a way that would likely draw scrutiny from investigators.

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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.

Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.

The deal would be the biggest leveraged buyout of all time, beating the $45-billion record set by Texas power utility Energy Future Holdings. The company already has a $2 billion investment from Saudi Arabia's sovereign fund as well as Tencent, which took a 5 percent stake in 2017.

Buying out all of Tesla's stock at $420 a share would value the company at over $80 billion - and although Musk said he had financial backing for it, he didn't give details.

Some on Wall Street shared that view. There are no active talks between the companies now, said the people, who asked not to be identified discussing private deliberations.

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Trading in Tesla was halted for an hour and a half on Tuesday afternoon, by which time the stock had soared to $370.

Bloomberg's Selina Wang and Giles Turner reported that Musk and Son failed to reach an agreement over the structure of the company, citing sources.

Former SEC chair Harvey Pitt told CNBC that while the USA 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".

Company share prices, particularly in deals as giant as this one, are nearly always decided by corporate executives, board members or consultants who review market data and optimize for maximum value.

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