Elon Musk 'Considering' Tesla Buyback at $420 to Take Company Private Again

Eileen GuzmanAug 08, 2018

Investors betting against Tesla (TSLA) lost about $1.3 billion after a tweet from CEO Elon Musk 's verified account which mentioned taking the company private, according to estimates from financial technology firm S3 Partners.

Major corporate news, like plans to take a public company private, is typically rolled out with extreme caution, at the risk of spooking investors or running afoul of the Securities and Exchange Commission.

During the conference call accompanying the results, Mr Musk said he expected the company to avoid going back to the markets for capital and to be "essentially self-funding on a go-forward basis".

Tesla reported an adjusted loss per share of $3.06 for the second quarter, which was larger than what analysts had predicted, and revenue of $4 billion, which beat analyst projections.

That baseless tweet was quickly deleted and Mr Musk apologised to the diver.

Tesla stock had closed on August 6 (the previous day) at $341.99.

While Musk has described himself as "half Democrat, half Repulican" in the past, it struck many as hypocritical that a green energy CEO would donate almost $40,000 (£30,700) to help keep in power a political party that has largely ignored or denied climate change.

Not long after the announcement, Tesla's stock surged 6.8 percent to $365.36 - adding $900 million to Musk's fortune in the process. He shared in a tweet that the move would insulate the company from some of the distractions that come with being a publicly traded company.

Meanwhile, Tesla has announced plans to build a factory in Shanghai, China, and another in Europe, but details are scarce and funding unknown.

Making money has proven elusive for Tesla while it has been investing in electric auto technology and ramping up production of its vehicles, including a sedan with a starting price of $US35,000 to appeal to a broader audience.

Musk also faced intense public criticism after he suggested in a tweet that one of the rescuers of the Thai soccer team trapped in a cave was a pedophile.

In an interview with Bloomberg News in January 2015, he spoke of the benefits of running his closely held rocket company Space Exploration Technologies Corp. and his frustrations with having taken Tesla public in June 2010. He said in his letter to employees that he did not seek to expand his ownership.

"Our guess is there is a one-in-three chance he can actually pull this off and bring Tesla private", Munster said.

Short sellers. These are the traders betting on the price of Tesla shares going down. That would cost about $70 billion, making it one of the biggest buyouts in USA history.

Raising both the debt and equity required for such a deal would be a challenge. It zoomed as high as $371 per share before trading was halted at $367 per share just after 2 pm EDT. "This is a boon for any bondholder at Tesla, because most of the bonds are convertible notes". The Times reported the Saudi's Public Investment Fund bought a three per cent to five per cent stake in the electric vehicle maker.

He stunned investors on Tuesday with a tweet saying he had already lined up the funding, and he told employees that it would relieve the electric auto company of the "enormous pressure" of Wall Street's expectations.

The SEC did not immediately respond to a request for comment on Musk's tweet.

George Galliers, analyst at Evercore ISI said he believed the tweet was serious.

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