Less spontaneous than it first appeared, the company’s board was aware of the proposal, Tesla's stock jumped.
Musk isn’t the first CEO to be frustrated at the way investors – in particular short-term investors - obsess about quarterly earnings, and he wont be the last. But is it feasible for him to do this and is it in the best interests of the company?
Musk has talked about having secured funding from a Saudi sovereign fund, but has provided no evidence to support that claim. At around $70billion, the costs of such a buy-out would be huge and analysts doubt the company is capable of funding such a large transaction.
There are several sovereign funds with the wherewithal to fund this and companies like Apple and Google are flush with cash, should they be interested. It appears that Tesla was in talks with SoftBank last year about taking a stake in the business.
Most buy-outs involve more mature companies who are generating a solid cash flow. Tesla is not in that position and is burning through cash at an alarming rate. If Tesla has to borrow heavily to fund this move, will the banks be any more forgiving than the short-sellers in the stock market that so irritate Musk?
Musk says he wants to take the company private so that it can “operate at its best, free from as much distraction and short-term thinking as possible.”
There’s no doubt that Musk has brought real energy and vision to the market for electric cars but, perhaps, what’s needed are a few less tweets less ‘noises-off’, and a laser-like focus on sorting out the problems with the company’s production line.
Unfortunately, that's unlikely. Tesla is now understood to be facing an investigation by the US securities market regulators about Musk's claim he had 'secured funding' to take the company private.
The gains in the share price, seen after his announcement, have been given up and if the claims about funding made by Musk are found to be false, he now risks civil and even criminal penalties.
If no firm details emerge about this funding then doubts are surely going to emerge about Musk's credibility and position as CEO.
