Tesla's board seeking more information on Musk's financing plan

Roman Schwartz
August 12, 2018

The shares dropped on back-to-back days after having jumped 11 percent Tuesday, when Musk vowed that he had "funding secured" at a spectacular $82 billion valuation. The stake is supposedly worth between $1.7bn and $2.9bn, effectively turning the PIF into one of Tesla's largest shareholders.

The revelation that the board is seeking more details from Mr Musk could raise new questions about how he plans to finance the deal at his proposed price of US$420 per share.

The reference to the company's stock is particularly relevant because Tesla shares immediately skyrocketed in the wake of Musk's tweet. This followed after Elson halted all the stock marketing on Thursday. Most recently, Muskk had the tech and automotive worlds scratching their collective heads after tweeting that he would consider taking Tesla private should the stock reach $420 a share.

Now, both are joining hands which could only bode well for everyone involved. Tesla is and probably always will be a company that will remain underneath the spotlight, so nearly any actions taken by the company itself or Elon Musk as an individual or CEO will have adverse effects on its stock price.

One of the biggest questions surrounding the buyout is Tesla's long history of losing money while it has been investing in electric auto technology and ramping up production of its vehicles. After Musk's tweets on Tuesday, they had climbed as high as 93 cents, around where they were the day before Moody's downgraded its Tesla rating to "B3" - six notches into junk territory - from its previous rating of "B2".

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The company is still working its way out of what Musk called "production hell" at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company's profitability rests.

The increasingly public feud between Musk and short-sellers of Tesla stock provided the motivation for Musk to go public.

"It's very obvious that Musk did not talk to any lawyers before he made his tweet", said John Coffee Jr., a Columbia University law professor and corporate-governance expert.

It could also use the cash for other projects, such as an investment in Saudi mega-city NEOM.

Once private, Tesla would have to continue filing public financial reports with the SEC if it has more than 300 shareholders. Trading in Tesla's stock was eventually halted until everyone could figure out what was going on. More so even than the significant financial costs associated with being public is the management time wasted in relentlessly repetitive discussions with fund managers and sell- and buy-side analysts.

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