Economy

Wall Street sees funding hurdle to Musk's plan to take Tesla private

Wall Street sees funding hurdle to Musk's plan to take Tesla private

Tesla shares fell as much as 3.4 per cent to US$366.52 before the start of regular trading, though they pared declines after the board statement.

Musk took Tesla shareholders and the stock market by surprise on Tuesday by announcing on Twitter he was considering taking the loss-making electric car-maker private at $420 USA a share.

About three hours into the trading day, Mr. Musk startled investors by writing on Twitter: "Am considering taking Tesla private at $420".

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.

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

In a release, board members Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch said Musk opened the discussion last 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".

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The board had "met several times over the last week" to discuss going private, the statement said. "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".

"W$3 e wonder how fully fleshed out Elon's tweets yesterday were", he wrote in a note.

But the board offered no further details of the proposal or its funding, sparking new questions about the feasibility of the master gambit Musk revealed in a surprise series of midday tweets on Tuesday. And as the stock price has climbed this year, so too have the bets against it.

His message followed a report that a Saudi investment fund had taken a almost 5% stake in Tesla.

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares.

If the content of Musk's tweet was not true, lawyers argue, it could expose Tesla's mercurial chief executive officer and the company to regulatory action and private lawsuits. "And if you stay as a shareholder you get less information than before and you depend more and more on Elon Musk".