Published: Wed, August 08, 2018
Business | By Tara Barton

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

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

Tesla has moved to further formalise the prospect of the electric auto company undergoing a buyout with a statement from the company's directors.

Mr Musk had "opened a discussion with the board" last week, the six directors said. The board said only that Musk had "addressed the funding for this to occur".

The board members said they were "taking the appropriate next steps" to evaluate the proposal.

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

Shares rocketed up 11 percent after Musk's grand reveal Tuesday, with some expecting they would hit $420 - the price Musk had promised shareholders would receive once the company had finalized its go-private transformation.

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Tesla stock opened at $369.09 on Wednesday, sliding almost 3 percent from its Tuesday closing price of $379.57.

But as the dust settles on Musk's latest Twitter escapade, questions remain over whether the Tesla chief executive broke SEC guidelines by tweeting the news. And as the stock price has climbed this year, so too have the bets against it. "At risk, of course, is that anything short of a formal take-private offer could trigger lawsuits from burned short-sellers, or at worst, public pressure to remove Musk as CEO". He said funding was "secured", without elaborating. The talks covered both the reasons for doing so - which Musk also laid out in an email to employees that was subsequently posted online - as well as the funding. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk". Tesla is a legendary cash-burner, with roughly $10 billion in debts and $2 billion in reserves, and Musk would probably need in the tens of billions of dollars to buy out shareholders at the right price.

"This proposal to go private would ultimately be finalized through a vote of our shareholders", Musk said in explaining the potential move. "That sense of the market, investors-so critical for a company like Ford".

The six board members who issued the statement on Wednesday included James Murdoch, chief executive of Twenty-First Century Fox Inc. and Brad Buss, who was the chief financial officer of solar panel maker SolarCity until it was bought by Tesla in 2016. Tesla's other board members are Musk, his brother Kimbal Musk and venture capitalist Steve Jurvetson.

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