Wall Street sees funding hurdle to Musk's plan to take Tesla private

Danny Moloshok  Reuters

Danny Moloshok Reuters

However, it certainly looks like his messages on social media have had direct consequences on Elon Musk's personal fortune, and on his company's stock price: Tesla shares started Tuesday trading at about $340 and went as high as $387.

A Tesla spokesperson declined to comment.

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".

Musk later tweeted that existing stockholders could choose whether to hold onto their shares or sell them to the new investors for $420 a share. 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.

It's also unclear how Musk came up with the $420 price.

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Public companies have four days to report certain material events that shareholders should know about to the U.S. Securities and Exchange Commission.

Of course, now that Musk has stated that he has secured the funds to do so, he may need to carry it out lest he face accusations of stock manipulation, according to FT, as the mere announcement of having the funds to take the company private caused Tesla stock to rise by 11 percent. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot.

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

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. He suggested he did in an initial tweet, but so far Tesla hasn't disclosed any sources of financing, and no one has stepped forward publicly to say they're backing the plan. Tesla was trading around $300 per share in April 2017 when the talks reportedly fell through.

China's Tencent Holdings Ltd, which took a 5-percent stake in Tesla past year, could also be a possible partner.

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'Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, ' Musk wrote.

Some on Wall Street shared that view.

Most analysts were skeptical, but some said a deal could materialize if Musk succeeded in lining up the right funding. Tesla did not immediately return a request for comment.

The company is still working its way out of what Musk called "production hell" at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company's profitability rests.

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