Here's what taking Tesla private means for the company and Elon Musk

Tesla and SpaceX CEO Elon Musk at a SpaceX press conference in Cape Canaveral Fla. on Feb. 6 2018. More

Shares were down 3 percent in premarket trading after closing up 11 percent at $379.57 on Tuesday.

Musk later clarified in a blog post that "a final decision has not yet been made", while touting the benefits of running a private company away from the "enormous pressure" of Wall Street's quarterly earnings cycle. This included discussing how being a private company could better serve Tesla's long-term interests.

Tesla Inc's board said it was evaluating taking the company private, a day after Chief Executive Elon Musk surprised shareholders with the idea of launching the biggest leveraged buyout of all time. The board, they said, had met "several times" over the last week and was actively working to "evaluate" the proposal. "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 most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF), which sources said on Tuesday had taken a stake of just below 5 percent in Tesla, or a major technology investment fund such as SoftBank Group Corp's Vision Fund, bankers said.

Mr Musk said in his tweet on Tuesday that shareholders would be offered $420 (£326) per share, valuing the business at more than $70bn.

Musk owns an nearly 20 per cent stake in Tesla, meaning he'd still need roughly $70 billion in financing to take Tesla private.




Teresa Goody, a former SEC official, said Musk "did something inappropriate and caused chaos in the market" in a way that would likely draw scrutiny from investigators. "I own about 20 percent of the company now, and I don't envision that being substantially different after any deal is completed", Musk added.

He said that would allow Tesla to "operate at its best, free from as much distraction and short-term thinking as possible".

Musk is already CEO of another private company: SpaceX.

The statement was not from the company's full board of directors. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot.

"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30. 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. If the statement regarding having secured the funding for the move later proves unachievable, then Musk could be in hot water with regulators over the statements that he first made on Twitter.

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