Economy

Doubts grow over Elon Musk’s master plan to take Tesla private

Doubts grow over Elon Musk’s master plan to take Tesla private

Elon Musk became $1.4 billion on Tuesday richer as Tesla's stock surged after he tweeted that he was thinking of taking the company private.

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

Musk took Tesla shareholders and the stock market by surprise on Tuesday by announcing on Twitter he was considering taking the loss-making electric car-maker private at $420 U.S. a share.

Musk laid out his reasoning for going private in an email to Tesla employees yesterday, which was subsequently posted on Tesla's website.

Tesla revealed that Musk currently holds "about 20 percent of the company now" and that he doesn't see that changing.

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"This proposal to go private would ultimately be finalized through a vote of our shareholders", Musk said in explaining the potential move. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot. Board members met several times and also addressed funding for the move, according to the statement.

Elon Musk's tweets early on Tuesday caused plenty of speculation and controversy.

Net net, Rusch reiterates an Outperform rating on Tesla shares, with a price target of $385, which represents a slight upside potential from current levels.

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 most obvious equity partners for Mr Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF), which sources said had taken a stake of just below 5 percent in Tesla, or a major technology investment fund such as SoftBank Group Corp's Vision Fund, bankers said. That report had already partly lifted Tesla's stock.

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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.

There still are near-term execution risks around ramping up Model 3 production and the ability to generate cash, Jonas believes.

Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.

Investors have also questioned why the maneuver was not listed in a 69-page SEC filing, submitted last week and released Monday, that provided intricate detail of Tesla's financial outlook and coming events.

Names excluded from the board statement were Musk; his brother, Kimbal Musk; and Steve Jurvetson, a venture capitalist and early Tesla backer who's been on leave since a year ago.

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No board member has come forward to back the plan.