Doubts grow over Elon Musk’s master plan to take Tesla private

Danny Moloshok  Reuters

The brief statement by six of the nine board directors said that the discussions about taking the company private had also "addressed the funding for this to occur". But after the markets opened Wednesday morning, Tesla's stock edged downward about 1 percent, to $375.

Musk has 22.3 million followers on Twitter, and Tesla's share price was already rising after the Financial Times reported that Saudi Arabia's sovereign wealth fund had taken a $2bn stake in the company. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long term.

Other board members mentioned in the statement included Robyn Denholm, Ira Ehrenpreis, Antonio Gracias and Linda Johnson Rice. The board, they said, had met "several times" over the last week and was actively working to "evaluate" the proposal.

"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?"

He set a target stock price of $420 a share and said he had investors lined up to purchase the company at that price.

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Some Wall Street analysts were skeptical of Musk's ability to gather the huge financial backing to complete such a deal, given that Tesla loses money, has $10.9 billion of debt and its bonds are rated junk by credit ratings agencies. Korus said he would need more details from Musk to judge whether a buyout offer would be practical and at what price it would be attractive.

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

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.

"Just because" Musk wants it at $420 "doesn't mean that there aren't other people who might be willing to come in with another transaction that would be more beneficial to shareholders", Pitt said. If the statement regarding having secured the funding for the move later proves unachievable, then Musk could be in hot water with regulators over the statements that he first made on Twitter.

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