Wall Street and Washington have the same question for Elon Musk: Where’s the money?
Mr Musk thrust his fellow directors into an unprecedented situation by tweeting Tuesday that he was considering taking Tesla private at $420 a share.
After raising $450 million last year and another tranche of $214 million this year, the company is valued at about $25 billion.
For years SpaceX has run an internal stock market for employees and other shareholders, allowing it to remain closely held. “Either they can stay investors in a private Tesla or they can be bought out at $420 per share”.
However, the deal structure would come with big logistical and legal challenges when it comes to buying out smaller shareholders, analysts have said. This sent shockwaves in the stock market. They profit if they repurchase the shares at a lower price, but can face astronomical losses if the price rises instead.
Some Wall Street analysts are skeptical about Musk’s ability to garner enormous financial support to complete such an agreement, given Tesla’s losses, its United States $ 10.9 billion in debt and its bonds rated in speculative territory by global agencies. The SEC’s requirements say a company must file an official disclosure within four days of a major event. The SEC declined to comment.
While Musk is offering to buy investors out at $420 a share, he is also encouraging them to hold onto their stock.
Piper Jaffray analysts now have the equivalent of a buy rating on Tesla stock with a price target around $389, lower than Musk’s estimated $420 figure to take the company private.
According to UK’s the Guardian, this new valuation would float his company from its current stock market value of $63.8 billion to a whopping $82 billion, a near $20 billion inflation.
Such is the unusual nature of Elon Musk’s varied business ventures, there tends to be considerable attention on pretty much everything he does and says. The share price jumped 3 percent immediately after the news.
One of the biggest questions surrounding the buyout is Tesla’s long history of losing money while it has been investing in electric auto technology and ramping up production of its vehicles. He concluded by saying that this price swing is a problem rather he termed it as a ‘ distraction’ for the companies well being and to all its employees who according to the company are the shareholders. For the record, Tesla has not been accused of any wrongdoing.
Tesla is and probably always will be a company that will remain underneath the spotlight, so nearly any actions taken by the company itself or Elon Musk as an individual or CEO will have adverse effects on its stock price. And because shares would no longer be traded on an exchange, short sellers would be shut out.
Bloomberg said a potential deal between Aramco and SABIC could enable the PIF to raise billions of dollars it had hoped to collect from Aramco’s stalled IPO.
No other shareholder owns 10 percent or more. I always think of Westinghouse’s efforts to transform itself from a heavy industrial to a media company in the 1990s, but that is just anecdotal. “It doesn’t make sense to me”. While Tesla undoubtedly has excellent executives and a cadre of top professional talent, it seems to me that these funders are making an extraordinarily large bet on one man and his ability to achieve his vision. The halting of the stock exchange determine the future of the company.
Investors also may have been spooked by reports that the SEC is looking into Tesla.
Tesla stock has declined sharply in light of the uncertainty, dropping to $354 midday Thursday.