Tesla CEO Elon Musk shocked the financial world yesterday when he used Twitter to announce he was thinking about taking the company private and had already secured enough funding to do so. In his first tweet he said funding was secured but provided no details.
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. 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.
At that price, and given Musk's 20% stake in Tesla, roughly $60 billion would be needed to go private.
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".
"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.
JPMorgan analyst Ryan Brinkman said he gave only a 50 per cent probability that Tesla would go private.
There is no evidence this was Musk's intention with his remarks on Tuesday.
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Buying Tesla in its entirety would cost US$72b, based on the company's outstanding stock as of July 27.
Musk's plan for a price of $420 a share would value a deal at more than $70 billion.
They said this "included discussion as to how being private could better serve Tesla's long-term interests".
Those who believe Musk is carrying out a vendetta against short sellers may point to a May 4 tweet suggesting he might have something up his sleeve.
China's Tencent Holdings Ltd, which took a 5 percent stake in Tesla previous year, could also be a possible partner. In its statement, the board said the company's chief executive had "addressed the funding for this to occur".
They did not include Mr Musk, his brother Kimbal Musk, and Steve Jurvetson, a venture capitalist.