Tesla Board Members Pipe Up on Musk's Going-private Plan
Six members of the Tesla board of directors issued a statement Wednesday, claiming CEO Elon Musk spoke to them last week about his plan to take the publicly traded company private. Musk shocked investors and analysts Tuesday after he tweeted his vision of the automaker’s corporate future, claiming funding existed to pull it off. He later shared an internal email to employees on the company’s blog.
Though Musk’s blog post doesn’t mention how he’d bankroll such a massive buyout, the company’s board says he discussed the funding issue with them.
The statement from board members Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch was brief:
Last week, Elon opened a discussion with the board about taking the company private. 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. The board has met several times over the last week and is taking the appropriate next steps to evaluate this.
Musk envisions taking the company private at $420 a share, which means a deal of roughly $72 billion. While he cautioned that a final decision has not been made (the board would obviously like a say), the CEO did claim via Twitter that funding was secured, raising the obvious question: who’s going to put up the dough to buy back all those shares?
CNBC contacted several Wall Street banks, all of which hadn’t heard a peep about Musk’s plan. Reuters, noting that Musk’s plan, if it comes to pass, would be the largest leveraged buyout of all time, speculated on which equity partners could handle such a deal. One possibility is Saudi Arabia’s Public Investment Fund, which recently bought a stake of close to 5 percent. Another is China’s Tencent Holdings Ltd, which also owns a 5 percent stake in the automaker.
Still, Musk wrote that he’d prefer as many shareholders as possible retain their stake, which would make the buyout a cheaper proposition.
The plan isn’t sitting well with many. Speaking to Reuters, NordLB analyst Frank Schwope said, “Who gives $30 to $50 billion to buy back the shares? And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk.”
In a note, Barclay’s wrote, “This is out there, even for Tesla. Buyout would require about $70 billion: roughly $60 billion for equity and about $10 billion to take out debt. With 145 million shares, a buyout at $420/share would require $60 billion to take out all public shareholders.
Morgan Stanley wrote that it sympathized with Musk’s reasoning, adding that the desire to take Tesla private indicates either an imminent return to profitability or the discovery of a previously absent source of capital. However, it asked, “If Tesla’s CEO really wanted to go private… why announce it to the world in this way… which could significantly contribute to the required premium and financial leverage?
The company isn’t profitable, it still faces a mountain of production challenges, and its CEO is well known for his controversial remarks and decisions. Still, the benefits for a company (and CEO) that likes to keep things close to the vest are clear. Musk laid this out in Tuesday’s blog post.
Many analysts and observers spent Tuesday pointing out that, by tweeting out this bombshell, Musk has a very limited time in which to inform the U.S. Securities and Exchange Commission of his intentions — or risk running afoul of the law.
[Image: Elon Musk/Twitter]
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- Keith Maybe my market's different. but 4.5k whack. Plus mods like his are just donations for the next owner. I'd consider driving it as a fun but practical yet disposable work/airport car if it was priced right. Some VAG's (yep, even Audis) are capable, long lasting reliable cars despite what the haters preach. I can't lie I've done the same as this guy: I had a decently clean 4 Runner V8 with about the same miles- I put it up for sale around the same price as the lower mile examples. I heard crickets chirp until I dropped the price. Folks just don't want NYC cab miles.
- Max So GM will be making TESLAS in the future. YEA They really shouldn’t be taking cues from Elon musk. Tesla is just about to be over.
- Malcolm It's not that commenters attack Tesla, musk has brought it on the company. The delivery of the first semi was half loaded in 70 degree weather hauling potato chips for frito lay. No company underutilizes their loads like this. Musk shouted at the world "look at us". Freightliners e-cascads has been delivering loads for 6-8 months before Tesla delivered one semi. What commenters are asking "What's the actual usable range when in say Leadville when its blowing snow and -20F outside with a full trailer?
- Funky D I despise Google for a whole host of reasons. So why on earth would I willing spend a large amount of $ on a car that will force Google spyware on me.The only connectivity to the world I will put up with is through my phone, which at least gives me the option of turning it off or disconnecting it from the car should I choose to.No CarPlay, no sale.
- William I think it's important to understand the factors that made GM as big as it once was and would like to be today. Let's roll back to 1965, or even before that. GM was the biggest of the Big Three. It's main competition was Ford and Chrysler, as well as it's own 5 brands competing with themselves. The import competition was all but non existent. Volkswagen was the most popular imported cars at the time. So GM had its successful 5 brands, and very little competition compared to today's market. GM was big, huge in fact. It was diversified into many other lines of business, from trains to information data processing (EDS). Again GM was huge. But being huge didn't make it better. There are many examples of GM not building the best cars they could, it's no surprise that they were building cars to maximize their profits, not to be the best built cars on the road, the closest brand to achieve that status was Cadillac. Anyone who owned a Cadillac knew it could have been a much higher level of quality than it was. It had a higher level of engineering and design features compared to it's competition. But as my Godfather used to say "how good is good?" Being as good as your competitors, isn't being as good as you could be. So, today GM does not hold 50% of the automotive market as it once did, and because of a multitude of reasons it never will again. No matter how much it improves it's quality, market value and dealer network, based on competition alone it can't have a 50% market share again. It has only 3 of its original 5 brands, and there are too many strong competitors taking pieces of the market share. So that says it's playing in a different game, therfore there's a whole new normal to use as a baseline than before. GM has to continue downsizing to fit into today's market. It can still be big, but in a different game and scale. The new normal will never be the same scale it once was as compared to the now "worlds" automotive industry. Just like how the US railroad industry had to reinvent its self to meet the changing transportation industry, and IBM has had to reinvent its self to play in the ever changing Information Technology industry it finds it's self in. IBM was once the industry leader, now it has to scale it's self down to remain in the industry it created. GM is in the same place that the railroads, IBM and other big companies like AT&T and Standard Oil have found themselves in. It seems like being the industry leader is always followed by having to reinvent it's self to just remain viable. It's part of the business cycle. GM, it's time you accept your fate, not dead, but not huge either.
"But I do know that Tesla with just a single model outsells every car model offered by BMW in America. All of them. Combined. Crushed by the Model 3" Only if you restrict yourself to compare the initial sales burst of a car that has been preordered for years and years, to the simple business as usual sales of a more normal automaker. Per that method of counting, virtually every single current one-hit-wonder outsells the Beatles for the first heady few weeks his hit's release, as well. IOW, it's not an incorrect statement per se, but it isn't necessarily all that relevant a metric either. OTOH, if you look at who has sold the most cars up until now, BMW or the Model 3; BMW still looks very much to be the Beatles in that comparison.....
You're not supposed to make statements like that.