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Elon Musk and Tesla: Tweet, rattle and roll

12 August 2018

David Whiston, an equity strategist at Morningstar who covers the U.S. auto industry, said he was confused by Musk's tweets, which he said indicated Musk had both the funding and the shareholder votes necessary to take the company private.

The SEC on Wednesday asked Tesla whether one of CEOElon Musk's tweets about the possibility of taking the company private was truthful, The Wall Street Journal reported.

Tesla hasn't disclosed any sources of financing for the deal and no one has stepped forward publicly to say they're backing the plan.

$420 a share happens to be the price Musk values his company at if it is to go private. The shares have dropped on back-to-back days after jumping 11 percent on Tuesday, when Musk vowed that he had "funding secured" at a spectacular $82 billion valuation.

The reference to the company's stock is particularly relevant because Tesla shares immediately skyrocketed in the wake of Musk's tweet.

The agreement would be the largest purchase based on debt of all time, surpassing the record of United States $ 45 billion established by the firm of Texas Energy Future Holdings. As far as Musk's stated share price to take the company private, analysts stated that there's upside risk in the near term to around $400 but downside risk to $340, "if no firmer details emerge, as investors would likely increasingly debate Musk's credibility and over-focus on the shares' price and volatility".

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For Musk personally, as Tesla's CEO, going private must be extremely enticing. Musk, to date has operated with a unique level of autonomy for a public company CEO, splitting his time with other business ventures (SpaceX, Boring Company), getting personally involved in projects of personal interest (rebuilding Puerto Rico, Thai cave rescues), doing deals which make no economic sense (Solar City), tweeting on whatever topic he feels like. Bloomberg News, which first reported on that meeting, said the talks failed to progress due to disagreements over ownership.

"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, and where there is as little change for all of our investors, including all of our employees, as possible", he wrote in a blog post following his tweet. Korus said he would need more details from Musk to judge whether a buyout offer would be practical and at what price it would be attractive.

Saudi Arabia's Public Investment Fund (PIF) has taken a stake of less than 5 per cent in Tesla, a source familiar with the matter said on Tuesday. "Maybe he has a joint in his hand", said Joe Phillippi, a long-time Wall Street analyst who now runs AutoTrends Consulting, said to TheDetroitBureau.com after the run-up began.

After raising $450 million last year and another tranche of $214 million this year, the company is valued at about $25 billion. The company's largest shareholders have declined to comment.

Tesla is still working its way out of what Mr 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. Finally, 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. The three-sentence statement that six board members issued the next day failed to address major questions including how the deal would be funded and in what way it could be structured.

The exact information that Musk communicated to the board about his plan could not be learned.

Elon Musk and Tesla: Tweet, rattle and roll