Tesla Inc's board said it was evaluating taking the company private, a day after Chief Executive Elon Musk surprised shareholders with the idea of launching the biggest leveraged buyout of all time. But after the markets opened Wednesday morning, Tesla's stock edged downward about 1 percent, to $375. It rose slightly in early trading, moving to about $375 per share by 10:45 a.m. ET.
Elon Musk disrupted multiple industries on Tuesday when the Tesla CEO [NYSE: TSLA] took to Twitter to float the idea of taking the Silicon Valley automaker private.
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.
Musk later clarified in a blog post that "a final decision has not yet been made", while touting the benefits of running a private company away from the "enormous pressure" of Wall Street's quarterly earnings cycle.
"They're being bombarded with questions that we don't think are as relevant to the long-term value of the company", said Sam Korus, an analyst for ARK Investment Management, which had 443,874 Tesla shares as of June 30.
Tesla said on Wednesday the discussions had addressed the issue of how to fund such a deal, but gave no details. "The board has met several times over the last week and is taking the appropriate next steps to evaluate this".
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He set a target stock price of $420 a share and said he had investors lined up to purchase the company at that price.
Most analysts were skeptical, but some said a deal could materialize if Musk succeeded in lining up the right funding.
"What does Musk mean by 'funding secured?"' asked Toni Sacconaghi, an analyst at Bernstein who has always been bearish on Tesla shares. Company share prices, particularly in deals as giant as this one, are nearly always decided by corporate executives, board members or consultants who review market data and optimize for maximum value.
"Distraction or not, the move feels right even if Musk is downplaying how supportive public markets have been".
"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.