Tesla board evaluating Elon Musk's proposal to take company private

Reuters  Rebecca Cook

Musk announced his plan on Tuesday on Twitter, an unusual move that has drawn scrutiny from the U.S. Securities and Exchange Commission, the newspaper said, citing people familiar with the matter. The SEC declined to comment. "The board has met several times over the last week and is taking the appropriate next steps to evaluate this".

Board members said that Tesla boss Elon Musk and had held several meetings about the move in the past week. "This included discussion as to how being private could better serve Tesla's long-term interests, and also addressed the funding for this to occur".

Tesla's shares were down 2.1 percent at $371.70 (288 pounds) on Wednesday after closing up 11 percent on Tuesday.

At $420 apiece, buying all of Tesla's shares would cost about $72 billion, but Morgan Stanley analyst Adam Jonas wrote in a note to investors Wednesday that he expects about $50 billion in additional net debt.

The deal would be the biggest leveraged buyout of all time, beating the $45 billion record set by Texas power utility Energy Future Holdings. This proposed route would also keep all Tesla employees as shareholders/investors in the company, while Tesla would adopt an ownership and governance structure similar to the current form of SpaceX.

The statement by the board, published by NASDAQ, confirms that the proposal is under serious consideration.

At the time of the talks, Tesla was trading at just over $300 a share.

The issue of share accumulation by outsiders emerged only recently as reports that Saudi Arabia's public investment fund had built up a stake from 3 to 5 percent after its offers of purchase of new shares in Tesla were spurned by the company.

Tesla's CEO also laid out what he envisions as the ideal path for going private.

Musk shocked the market, yet again with a tweet on Tuesday that he was considering taking the loss-making company private at $420 a share.

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

Some on Wall Street shared that view. The talks are no longer underway, Bloomberg said. But they did not reveal who or what institution Musk may have been referring to when he posted "funding secured".

Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla's valuation higher than that of GM.

There still are near-term execution risks around ramping up Model 3 production and the ability to generate cash, Jonas believes. MarketWatch reported that information like the fact that the CEO is considering taking a public company private is generally supposed to be announced to investors and the public by way of official earnings reports and press releases.

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