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Wall Street sees funding hurdle to Musk's plan to take Tesla private

Wall Street sees funding hurdle to Musk's plan to take Tesla private

"Last week, Elon opened a discussion with the board about taking the company private", six directors on Tesla's nine-member board said in a statement. Shares rocketed up 11 percent after Musk's grand reveal Tuesday, with some expecting they would hit $420 - the price Musk had promised shareholders would receive once the company had finalized its go-private transformation.

Tesla is a legendary cash-burner, with roughly $10 billion in debts and $2 billion in reserves, and Musk would probably need in the tens of billions of dollars to buy out shareholders at the right price.

The six board members who issued the statement on Wednesday included James Murdoch, chief executive of Twenty-First Century Fox Inc. and Brad Buss, who was the chief financial officer of solar panel maker SolarCity until it was bought by Tesla in 2016.

The statement by the board, published by NASDAQ, confirms that the proposal is under serious consideration.

Trading in Tesla was halted for an hour and a half on Tuesday afternoon, by which time the stock had soared to $370.

Former SEC chair Harvey Pitt told CNBC that while the USA stock market regulator permits executives of publicly listed companies to use social media to make statements about their businesses, Musk's tweet was still "highly unprecedented".

He said that would allow Tesla to "operate at its best, free from as much distraction and short-term thinking as possible".

There has been no word on when any vote might take place.

Tesla stock closed Tuesday at $379.57. But going private could also complicate Tesla's effort to build a mainstream electric auto by removing the easy access to capital the Wall Street darling has enjoyed.

Midway through the trading session in NY on Wednesday, Tesla shares were down 5% at $374 after surging 11% on Tuesday. The move would also foreclose the option of selling more stock to raise cash every year, a move which Musk has disfavored in recent years.

I drove the regular, 271-hp, rear-wheel-drive Tesla Model 3 a few months ago and liked it.

Musk has some sensible reasons for going private.

The Tesla board responded to the proposal earlier Wednesday morning, indicating that it is evaluating things.

It's unclear who Musk secured funding from.

Tesla may find it hard to line up banks and investors to lend it large sums.

The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF), which sources said on Tuesday had taken a stake of just below 5 percent in Tesla, or a major technology investment fund such as SoftBank Group Corp's Vision Fund, bankers said. He might not get all of those to buy into his plan.

Two of the potential stumbling blocks to Musk's plan include the stock price premium not being enough to get the existing shareholders on board to support the sale and coming up short on the announced funding to complete the transition.

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