Published: Sun, August 12, 2018
Business | By Eloise Houston

Tesla shares sink as pressure mounts on Musk to show the money

Tesla shares sink as pressure mounts on Musk to show the money

The hedge funds betting on a slump in the Tesla share price are holding their nerve amid mounting scepticism that Elon Musk can muster the $82 billion he will need to take it private.

Musk, in tweeting Tuesday that he may take Tesla Inc. private, said he hoped "all" investors would remain shareholders after the buyout rather than follow the conventional approach of cashing out.

While Tesla's board has held multiple discussions about the proposal, it has not yet received a detailed financing plan from Musk, nor specific information on who will provide the funding, one of the sources said. Musk said he wants all Tesla investors to continue to hold private company stock. The company has completed more than 50 successful Falcon launches and snagged billions of dollars in contracts, including from NASA and the U.S. Department of Defense.

Over the past few weeks and months, Tesla and more specifically CEO of Tesla Elon Musk have been in the news quite a fair bit, and a good amount of that press hasn't been exactly positive.

Now, attorneys from that office are also examining whether Musk's tweet about having funding secured to buy out the company was meant to be factual, according to one of the people.

Musk's recent Twitter musings about taking Tesla private may have been an expression of his particular sense of humor.

SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's self-driving unit, Cruise, Reuters reported earlier on Wednesday. Musk, to date has operated with a unique level of autonomy for a public company CEO, splitting his time with other business ventures (SpaceX, Boring Company), getting personally involved in projects of personal interest (rebuilding Puerto Rico, Thai cave rescues), doing deals which make no economic sense (Solar City), tweeting on whatever topic he feels like. The talks failed to progress due to disagreements over ownership and have not started up again.

In an internal letter to Tesla employees, Musk confirmed he was considering taking the company private in order to free it from "short-term thinking" and other "distractions". The Financial Times reported earlier this week that Saudi's Public Investment Fund bought a 3% to 5% stake in the electric auto maker. The company's largest shareholders have declined to comment.

This sudden turn of events could be in favor of both parties, i.e Saudi PIF and Tesla, as Musk has been finding it hard keeping the company's objectives and management focused.

The company is still working its way out of what Musk called "production hell" at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company's profitability rests.

The expected decision by Tesla's board to ask Musk to excuse himself from future talks is not unusual in these types of cases, notes CNBC. A special committee of independent directors will likely review the details, and the board has told Mr Musk - who owns 20 per cent of the company - that he needs his own separate advisers, the news outlet said.

No major banks or investors have come forward to say that they have been contacted to help fund the take-private move - which, at about $70 billion, would be the largest LBO ever.

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