TESLA

It has been a roller coaster ride this month for TESLA shareholders when Elon Musk announced that he intends to take the company private last August 7 and then finally telling the public thru its blog last August 24 that it will remain public. See below Musk’s tweet:

Am considering taking Tesla private at $420. Funding secured.

— Elon Musk (@elonmusk) August 7, 2018

Last August 10, there were reports that SEC is investigating TESLA and looking for supporting documents to back up Elon Musk’s claim on privatization. Right after the Wall Street Journal reported the said SEC inquiry, shares of TESLA once again fell sharply.

Aside from WSJ’s report, Bloomberg also reported that SEC is intensifying it’s scrutiny on the electric car company as Elon Musk’s statement should be factual. They are also gathering TESLA’s public announcements or statements regarding their manufacturing goals and sales target according to Bloomberg.

August 13, Elon Musk announced that a Saudi fund wants to take TESLA private, supporting his claim that its privatization is secured. According to him, his tweet was based on the on-going negotiations with the Saudis. Here is his statement as published on TESLA’s official website:

Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private.

Recently, after the Saudi fund bought almost 5% of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st.

I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving. This is why I referred to “funding secured” in the August 7th announcement.

An interview with TESLA’s CEO on NYT last August 16 didn’t help either to improve the company’s shares, in fact, it tumbled even lower. His statements, for others, showed that he’s on the brink of an emotional breakdown. Below are some of his words:

“This past year has been the most difficult and painful year of my career,” he said. “It was excruciating.”

According to NYT, in the hourlong interview, he choked up several times and even stated that he missed his Brother’s wedding and spent his birthday in his office.

When asked about his health:

“It’s not been great, actually. I’ve had friends come by who are really concerned.”

August 20, as JP Morgan sliced off its target price for TESLA from 308 to 195, the company’s stock price once again slid down to it’s lowest intraday since July 30 at a price of $288.20.

The same analysts who boosted their price after Musk’s tweets now don’t believe that the fund is there or that there were even serious negotiations. Here is the statement from Ryan Brinkman, lead automotive equity research analyst for JP Morgan:

“Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal”

Here is the price chart for TESLA courtesy of Yahoo Finance:

At the company’s official website blog, the CEO cited several items why he decided that TESLA will remain public:

• Given the feedback he received, according to him most of Tesla’s existing shareholders believe are better off as a public company.

• He said that the process of going private is more time-consuming and distracting that he

  initially anticipated.

• He further stated that “my belief that there is more than enough funding to take Tesla

  private was reinforced during this process.”

And while many shareholders still believe in TESLA and Elon Musk, there are several who has doubts about him and the profitability of the company, one of which is Cannacord’s analyst Jed Dorsheimer. On Tuesday, he stated has doubts if the company can remain solvent. Here are his official statements:

“We feel less confident in the company’s ability to meet it’s 50,000 to 55,000 production guidance indicated at the end of [the second quarter].”

“Although Tesla has managed to stem the outflow of cash in its most recent quarter, it is still burning cash at a rate that necessitates the Model 3’s success in order to achieve profitability.” 

According to him, with the company’s current burn rate, it can only sustain itself up to nine months and it would need to secure its profitability to remain its solvency.