Never a Dull Day with Tesla (TSLA)

Tesla's board likely to ask Musk to recuse himself from go-private plans

Tesla TSLA

Two days after Elon Musk, the Tesla chairman and CEO, tweeted that he’s considering converting the electric car maker into a private company, CNBC, citing people familiar with the matter, reports that Tesla’s board of directors is planning to meet with financial advisors next week to discuss Musk’s proposal.

The report also said that a special committee comprised of independent directors will likely review the details, and that the board has told Musk — who owns 20% of the company — that he must consult a separate, personal set of advisors.

Musk jolted financial markets on Tuesday when he revealed on Twitter he was considering financing a Tesla (NASDAQ:TSLA) buyout at a price of $420 a share. Musk also said he had secured the funding necessary to do it.

But two days later, it’s unclear where that funding will come from. The Financial Times reported that Musk met with Saudi Investors, but the company has not commented. Furthermore, Reuters reports that despite holding multiple discussions about the go-private proposal, Tesla’s board has yet to receive specific information about the deal and how it may be funded.

Tesla right now has a market cap of around $63 billion.

Taking the company private at $420 a share would value it around $82 billion, including debt.

If Musk were to take Tesla private, he would need more than $50 billion, a figure which according to Bloomberg would make the deal “the largest leveraged buyout in history.”

Going private may be expensive but Musk believes the approach would not only liberate him from dealing with skeptical Wall Street analysts and short sellers but it would also rid the company from the “enormous pressure” of the quarterly earnings cycle. Musk reinforced his views in an email sent to Tesla employees where he said he doesn’t believe the current environment fits with Tesla’s “long-term, forward-looking mission.”

Musk also said he viewed going private as “the best path forward,” but a final decision had not been made and ultimately rested on shareholder support.

Tesla’s stock dropped to $352.45 at market close Thursday. It rose 2.3% to $360.61 in trading Friday before U.S. exchanges opened. The name is currently changing hands at $346 and change.

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