Business Corpus: Tesla's Board Responds To Musk's Tweet Thunderstorm On Going PrivateThe board of directors of Tesla issued a statement early Wednesday to confirm that Chief Executive Elon Musk had opened a discussion with them about taking the company private. The post Tesla's Board Responds To Musk's Tweet Thunderstorm On Going Private appeared first on Investor's Business Daily.

[Collection]

The Tesla (TSLA) board of directors confirmed Wednesday that Chief Executive Elon Musk had opened a discussion about taking the company private, as Wall Street struggled to make sense of the stunning proposal.

The Tesla board issued a statement, responding to Musk's initial tweets on the idea, which came Tuesday. Musk said he considered taking the electric car maker private at $420 a share, or about $70 billion. As Tesla's largest shareholder with a stake of about 20%, Musk said he had the funding secured.

"The board has met several times over the last week and is taking the appropriate next steps to evaluate this," according to the Tesla board's letter. "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 shares finished Tuesday trading up 11% to 379.57. Tesla shares were down about 0.8%, near 377, during morning trading on the stock market today.

Wall Street analysts pondered Musk's surprising move. It caused trading in Tesla stock to be halted Tuesday afternoon for more than an hour.

Will Tesla's Board Go Along?

Musk has yet to prove he can get the board and shareholders to go along with the deal. It's also unclear whether Tesla can properly raise funds and complete the transactions. It would be one of the largest buyout deals in corporate history.

"Although Tesla did confirm a potential privatization through Musk's statement, no theoretical transaction method, funding plan, or structure was outlined, and there is still some skepticism over whether such a transaction would ultimately be executed," Bank of America Merrill Lynch analyst John Murphy said in a note to clients. "Privatization of the company is still very much unclear at this point."

Musk's plan is to remain chief executive of Tesla and its largest shareholder. Tesla stockholders would have the option of cashing out at a proposed price of $420 per share. Or they could retain their stake in Tesla stock with the possibility to cash out down the road. Perhaps the biggest obstacle of all is acquiring the funds needed to pull off the deal.

"We expect vigorous debate on the fairness of the proposed $420 price," Oppenheimer analyst Colin Rusch wrote in his report to clients. "We believe many shareholders are seeking a liquid security that has significant upside to the indicated take-private price."

Musk's desire to take Tesla private stems from his belief that it would operate better as a privately held company.

"The reason for doing this is all about creating the environment for Tesla to operate best," Musk said in the letter to employees on Tuesday titled "Taking Tesla Private."

Most Shorted Stock In History

"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders," Musk said. He went on to say: "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."

Several analysts agreed with Musk on this point but remained skeptical of the overall plan.

"We sympathize with Elon Musk's argument that Tesla could be better off as a private company," Morgan Stanley analyst Adam Jonas said in his note. "Taking the company private would assume one of 2 factors changing: (1) that the company is on the verge of generating self-sustaining cash flows or (2) that the company can tap into a range of strategic sources of capital not previously at its disposal."

Analysts also questioned why Musk would present such a significant offer to go private via Twitter.

"This is out there, even for Tesla," wrote Barclay's analyst Brian Johnson.

YOU MIGHT ALSO BE INTERESTED IN:

Tesla Earnings Beat On Revenue As Model 3 Production Hits Targets

Tesla Stock Gets Price Target Increase, Upgrades As Model 3 Trust Grows

The post Tesla's Board Responds To Musk's Tweet Thunderstorm On Going Private appeared first on Investor's Business Daily.