Published: Wed, August 08, 2018
Markets | By Otis Pena

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

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

Tesla directors have said they knew about Elon Musk's surprise proposal to privatise the money-losing auto maker before he tweeted about it and have met several times in the past week to discuss the proposal. The board has met several times over the last week and is taking the appropriate next steps to evaluate.

Board members said that Tesla boss Elon Musk and had held several meetings about the move in the past week. Investors were asking whether he really does have the equity or debt lined up to make it happen.

"Distraction or not, the move feels right even if Musk is downplaying how supportive public markets have been".

"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".

Musk, who has had a contentious relationship with Wall Street analysts, and short-sellers who bet against his stock, tweeted on Tuesday that he could take the company private at $420 per share-but Farley said a company doesn't necessarily run better if it's out of the public eye. Musk proposed a structure that would have given him disproportionate control over the company through stock with supervoting rights, one person said.

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 previous year.

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On Wednesday, Tesla's board said it was evaluating the proposal.

"Who gives $30 to $50 billion to buy back the shares?" asked NordLB analyst Frank Schwope.

Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla's valuation higher than that of General Motors Co. That kind of money may be accessible through sovereign wealth funds or other strategic investors, said Dwight Scott, president of Blackstone Group LP's GSO Capital Partners.

'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 talks are no longer underway, Bloomberg said.

In a letter after his tweet on Tuesday, Musk fleshed out his idea, suggesting shareholders would get the option to sell their shares for $420 each or remain investors in a private Tesla, out of the glare of Wall Street and its need for positive quarterly results.

"We think it would be extremely hard - bordering on impossible - to believe that TSLA could raise significant amounts of debt in public markets", he said.

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