Money Why Elon Musk wants to take Tesla private

07:20  08 august  2018
07:20  08 august  2018 Source:   cnbc.com

Elon Musk sued over tweets, proposal to take Tesla private

  Elon Musk sued over tweets, proposal to take Tesla private Tesla Inc. and its chief executive Elon Musk were sued twice on Friday by investors who said they fraudulently engineered a scheme to squeeze short-sellers, including through Musk's proposal to take the electric car company private. The lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion US transaction that valued the company at $420 per share, and that "funding" had been "secured.

Tesla shares went on a wild ride Tuesday after CEO Elon Musk said on Twitter that he was hoping to privatize the company at 0 a share. At that price, the market value of Tesla would be about billion.

Here's Elon Musk 's full announcement that he wants to take Tesla private . Earlier today, I announced that I'm considering taking Tesla private at a price of 0/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

Tesla shares went on a wild ride Tuesday after CEO Elon Musk said on Twitter that he was hoping to privatize the company at $420 a share. At that price, the market value of Tesla would be about $71 billion.

Initially, it wasn't clear if the CEO's proclamation was in jest — "420" is a popular code endorsing cannabis consumption. But Musk was dead serious.

In fact, Musk has signaled his wish to privatize the electric vehicle maker before. For example, he told Rolling Stone in November 2017, "It actually makes us less efficient to be a public company." But Musk delivered his informal proposal on Tuesday seemingly out of the blue.

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3 Reasons Why Elon Musk Is 100% Right in Wanting to Take Tesla Private . According to Gene Munster of Loup Ventures, Musk has a one-in-three shot of taking Tesla private , given the 16% premium he would pay to shareholders.

The following is the full text of Telsa Inc. TSLA, +10.99% Chief Executive Elon Musk ’s email to staff today regarding a going- private transaction Earlier today, I announced that I’m considering taking Tesla private at a price of 0/share. I wanted to let you know my rationale for this, and why I think

a screenshot of a cell phone © Provided by CNBC

By Tuesday afternoon, Musk made a more formal statement about privatizing Tesla in a company blog post

There are several reasons why Musk might want to go private:

Keep competitive information secret: As a privately held company, Tesla would not have to disclose information that could give competitors an edge.

By contrast, Tesla now makes quarterly disclosures about debt levels, personnel changes, executive compensation, how many cars are being produced and delivered, various lawsuits the company is facing, recent personnel changes, and its views of risks and competitors.

Align with long-term shareholder interests: As Musk alluded to in his letter, owners of privately-held companies can maintain control over every operational decision without running afoul of shareholders' quarterly expectations.

Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal

  Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposal Lawsuits accuse Tesla's Musk of fraud over tweets, going-private proposalThe lawsuits were filed three days after Musk stunned investors by announcing on Twitter that he might take Tesla private in a record $72 billion transaction that valued the company at $420 per share, and that "funding" had been "secured.

The following is the full text of Telsa Inc. TSLA, +10.99% Chief Executive Elon Musk ’s email to staff today regarding a going- private transaction Earlier today, I announced that I’m considering taking Tesla private at a price of 0/share. I wanted to let you know my rationale for this, and why I think

Tesla posted an email to employees from CEO Elon Musk on Tuesday afternoon. Earlier today, I announced that I'm considering taking Tesla private at a price of 0/share. I wanted to let you know my rationale for this, and why I think this is the best path forward.

He wrote that being public "puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term."

Loup Ventures' Gene Munster gave CNBC similar reasons why Tesla might want to be private:

"The benefits of being private are even more clear for Tesla, considering their ambitious mission. They want to accelerate the globe's adoption of renewable energy. Companies with a big mission like this are typically held back by managing for quarterly investor expectations.

This last quarter for Tesla is a great example — the amount of energy that they put into hitting a 5,000 Model 3 production target was disproportional to the reward that they got. The stock didn't do anything. The company would have been better off if they wold have stepped production down near-term and perfected their manufacturing. Don't worry about units per week today, but build a factory so it is best equipped to build for the future."

Tesla board plans to tell Elon Musk to recuse himself, prepares to review take-private plan

  Tesla board plans to tell Elon Musk to recuse himself, prepares to review take-private plan The board plans to meet with advisors next week about taking Tesla private, and has told Musk that he needs his own separate set of advisers.Load Error

Am considering taking Tesla private at 0. Funding secured. — Elon Musk (@ elonmusk ) August 7, 2018. " Musk does not want to run a public company," Munster wrote on his website. "His mission for Tesla (to accelerate the globe's adoption of sustainable energy) is both grand and long-term

Elon Musk 's Tesla makes a bid for SolarCity, company started by billionaire's cousin. The proposed marriage between both of Musk 's companies would ultimately involve SolarCity’s taking the Tesla name.

a man wearing a suit and tie looking at the camera © Provided by CNBC

Stock price. Musk may also have guessed that the announcement was going to bump the stock price, as one-time SEC chair Harvey Pitt hinted to CNBC Breaking News on Tuesday:

"Musk has complained about the market price, complained about shorts and got a quick bump of 5 to 8 percent on the price of the stock. If his comments were issued for the purpose of moving the price of the stock that could be manipulation. It could also be securities fraud. The use of a specific price for a potential going private transaction is highly unprecedented and therefore raises significant questions about what his intent was."

Tesla's stock price rose about 8 percent following Musk's tweets, building on a smaller rise on news earlier in the day that Saudi Arabia's sovereign wealth fund sought an equity stake in the electric vehicle make. The stock closed up 11 percent on the day.

With its stock price elevated above the $360 level, Tesla is now able to pay off some $900 million in obligations in stock instead of in cash.

Could it happen?

Musk owns around 20 percent of Tesla already. He would need to raise more than $50 billion to buy out other shareholders. Adding in around $10 billion in debt, such a deal would represent the largest leveraged buyout in history, surpassing the $45 billion acquisition of the Texas energy giant TXU (Energy Future Holdings) in 2007, which eventually went bankrupt.

Although Musk mentioned funding in his initial tweet, a blog post from Tesla did not include any mention of financing. CNBC also contacted a number of Wall Street banks and none of them was aware of any transaction or had committed to funding a leveraged buyout of Tesla.

Overall, Munster guesses that Tesla has a one in three chance of pulling off privatization at $420 per share. He said:

"It could be hard to incentivize the believers to give up their Tesla stock. Many of the public investors cannot invest in a private company, and would be forced to sell. I think a lot of them will not want this, at this time, and not for a 16 percent premium. That's just not enough."

Tesla forms three-member panel to decide on any Musk proposal .
Tesla Inc.'s board named a special committee of three directors on Tuesday to evaluate possibly taking the electric carmaker private, although it said it had yet to see a firm offer from the company's chief executive, Elon Musk.Load Error

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