Tesla shares dip after Elon Musk proposes going private

Tesla shares dip after Elon Musk proposes going private

Tesla shares dip after Elon Musk proposes going private

The shares surged 11 percent to $379.57 on Tuesday after Musk said he's considering taking Tesla private at $420 a share, or an enterprise value of about $82 billion. The SEC declined to comment.

The report came the day after Musk said he was considering taking Tesla private and that funding had been secured, but did not offer any specifics about the unprecedented move.

Former SEC chair Harvey Pitt told CNBC that while the USA stock market regulator permits executives of publicly listed companies to use social media to make statements about their businesses, Musk's tweet was still "highly unprecedented".

"Given the haphazard process of disclosure last afternoon, our initial impression was that Elon Musk sprung his plan of going private upon the public without consulting Tesla's board of directors or major shareholders", Bernstein analysts said in a note titled "Going private?"

On Wednesday, Tesla's board said it was evaluating the proposal. The surprise announcement was sandwiched between other provocative tweets and, among other things, promptly caused a temporary halt in the trading of Tesla shares on Wall Street while also causing some to doubt if Musk was being serious. "The board has met several times over the last week and is taking the appropriate next steps to evaluate this".

Musk laid out his reasoning for going private in an email to Tesla employees yesterday, which was subsequently posted on Tesla's website. Tesla was trading around $300 per share in April 2017 when the talks reportedly fell through.

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Bloomberg's Selina Wang and Giles Turner reported that Musk and Son failed to reach an agreement over the structure of the company, citing sources.

'Basically, I'm trying to accomplish an outcome where Tesla can operate at its best, free from as much distraction and short-term thinking as possible, ' Musk wrote.

Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the International Space Station Research and Development Conference in Washington, U.S., July 19, 2017.

Some on Wall Street shared that view. The transaction would amount to the largest leveraged buyout - in which a company borrows money to repurchase shares and exit the public market - of all time.

"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30.

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.

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