Tesla shares dip after Elon Musk proposes going private

CEO and lead designer at SpaceX and co-founder of Tesla speaks at the International Space Station Research and Development Conference in Washington

It would have to buy back all of its public shares.

One day after Tesla CEO Elon Musk raised the idea that he may take the electric car-maker private, Ford EVP Jim Farley says his company has no issues with being public.

Elon Musk is betting that a privately held Tesla Inc. would free his company of distracting scrutiny.

Is $420 high enough of a price to take Tesla private?

Public companies have four days to report certain material events that shareholders should know about to the U.S. Securities and Exchange Commission.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday.

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 (8.5 billion pounds) of debt and its bonds are rated junk by credit ratings agencies.

"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares. Many initially thought it was Elon Musk's attempt at a bad joke about marijuana, because "420" has always been associated with pot.

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The deal would be the biggest leveraged buyout of all time, beating the $45-billion record set by Texas power utility Energy Future Holdings. That last part is important, because Tesla's going to need a lot of it.

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. That's a key reason why Michael Dell chose to list shares of Dell Technologies (DVMT) on Wall Street again after taking the company private in 2013. "These guys want us to die so bad they can taste it", he said past year.

Musk is Tesla's biggest shareholder, holding 20 per cent of its stock.

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.

Former SEC chair Harvey Pitt told CNBC that while the U.S. 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".

Among these issues, short-sellers have especially posed a continuous problem for Tesla, and it's no surprise Musk would like to put an end to the roller coaster that their actions can cause, with him highlighting the view that Tesla is one of most shorted companies on Wall Street.

Other board members mentioned in the statement included Robyn Denholm, Ira Ehrenpreis, Antonio Gracias and Linda Johnson Rice. They did not include Mr Musk, his brother Kimbal Musk, and Steve Jurvetson, a venture capitalist.

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