Musk Scraps Plan To Take Tesla Private


Tesla shares were down roughly 2 percent in early trading Monday, after chief executive Elon Musk bowed to apparent pressure from stockholders to keep the electric vehicle maker a public company.

Mr Musk, Tesla's chief executive, revealed late on Friday night that he was abandoning a proposed buyout of Tesla, saying shareholders wanted the company to remain public.

This week would also be an inopportune time for a capital raising, given that many bankers and investors are away ahead of the September 3 Labour Day holiday.

Investors now must brace for another potential wild ride when USA trading opens Monday, while regulators and lawyers autopsy what happened to a deal potentially valued at US$82 billion and Tesla's board is left with a brilliant but exhausted and erratic chief executive officer.

Musk tweeted August 7 he was considering taking Tesla private and that funding had been secured.

"Musk's involvement in the company is critical, but now more than ever a solid #2 - someone with strong operational background that can help Tesla move from ideas to execution - is crucial", analyst Joseph Spak from RBC Capital Markets wrote in a client note.

Tesla's Vice President of Communications, Sarah O'Brien, is slated to leave the electric automaker next month following a two-year stint in her position, says Bloomberg. "While we are always looking for highly talented executives at Tesla, there is no active COO search", a Tesla spokesperson said in an email.

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It remains unclear what Musk meant by "funding secured".

Tesla had $2.78 billion in cash at the end of the second quarter, after a record $718 million loss. A Tesla spokesman declined to comment. "And now Tesla needs to get back to basics, which is ramping Model 3 production and profitability".

At the opening bell Monday, Tesla Inc. was trading at $319.96, down less than 1 percent.

In recent months, it has been beset by recalls, a Security and Exchange Commision investigation and, most recently, a pair of tweets by Musk that have left shareholders and critics wondering if Tesla is on the verge of profitability or if the auto maker meets technology innovator is in a bubble.

"Additionally, a number of institutional shareholders have explained that they have internal compliance issues that limit how much they can invest in a private company".

This week would also be an inopportune time for a capital raising, given that many bankers and investors are away ahead of the September 3 Labor Day holiday. Coffee noted that the SEC may feel as though these disclosures were deficient.