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 visionÂ 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 membersÂ 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 Teslaâ€™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 isÂ Saudi Arabiaâ€™s Public Investment Fund, which recently bought a stake of close to 5 percent. Another isÂ Chinaâ€™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,Â NordLB analyst Frank Schwope said, â€œWho 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.â€�
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 privateâ€¦ why announce it to the world in this wayâ€¦ 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 intentionsÂ â€” or risk running afoul of the law.
[Image: Elon Musk/Twitter]