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Musk Name-Drops Advisors, Tesla Forms Committee To Evaluate Potential Go-Private Deal

Musk Name-Drops Advisors, Tesla Forms Committee To Evaluate Potential Go-Private Deal

Tesla Inc. (NASDAQ: TSLA) CEO Elon Musk revealed Monday he is working with two major banks to take Tesla private, and Tesla announced it has created a formal committee to look into whether going private at $420 per share is in the best interest of Tesla stockholders. 

What Happened?

Elon Musk tweeted that he is working with investment bank Goldman Sachs Group Inc (NYSE: GS) and private equity company Silver Lake on constructing a deal to take Tesla private. Musk also said he has also hired Wachtell, Lipton, Rosen & Katz and Munger, Tolles & Olson as legal advisors.

In a separate announcement, Tesla said its board has formed a committee of three independent directors to evaluate Musk’s proposal on behalf of Tesla investors. In a press release, Tesla said it “has not yet received a formal proposal from Mr. Musk regarding any going private transaction nor has it reached any conclusion as to the advisability or feasibility of such a transaction.”

Why It’s Important

After Musk blindsided Wall Street by tweeting he had “funding secured” for a deal to take Tesla private, he was criticized for the lack of details he provided. Musk has been sued by traders who allege he didn’t have a deal in place and was instead using Twitter to manipulate Tesla’s share price.

This week, Musk revealed that much of the potential funding for the deal would come from the Saudi Arabia sovereign wealth fund. The latest news that Musk is working with teams of investors, banks and law firms are further indication that Musk’s proposal is serious.

What’s Next?

The revelation that Musk has yet to submit a formal proposal to the Tesla board may be a bit troubling for some investors. Tesla stock was down 0.66 percent at the time of publication Tuesday and is now significantly off its highs of around $380 following Musk’s original go-private tweet. Investors will be watching for news from Tesla about the details of Musk’s plan and the response from Tesla’s committee.

"Institutional investors need to weigh the illiquidity and funding disadvantages of private stakes with the benefits of management focus," Barclays analyst Brian Johnson said in a Monday note. "Institutional investors may also need to consider the lack of transparency and eventual liquidity inherent in a private stake."

Related Links:

Could SpaceX Help Finance A Tesla Go-Private Deal? Morgan Stanley Weighs In

Musk Tries To Clarify 'Funding Secured' In New Tesla Blog Post

Photo courtesy of Tesla. 

Latest Ratings for TSLA

Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021Piper SandlerMaintainsOverweight
Jan 2021Deutsche BankMaintainsBuy

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