Tesla board evaluating Elon Musk's proposal to take company private

Tesla and SpaceX CEO Elon Musk at a SpaceX press conference in Cape Canaveral Fla. on Feb. 6 2018. More

Harvey Pitt, a former chair of the Securities and Exchange Commission, said Musk's asserting a final sale price and that funding was "secured" opened him to potential charges of stock manipulation or securities fraud. Tesla did not immediately return a request for comment.

Tesla shares surged 11 percent Tuesday after a tweet from Musk's verified Twitter account that mentioned taking the company private at a $420 per share price.

Columbia Law School professor John Coffee discusses the legal concerns over Tesla CEO Elon Musk's tweet that he may take the company private. The SEC has previously ruled that using social media to disclose company news is OK, as along as investors have been told that those channels may be used.

Musk is already CEO of another private company: SpaceX. These reportedly include why the company decided to make such a major announcement on Twitter and if it believes "investor-protection rules had been met".

Some Wall Street analysts were skeptical of Mr Musk's ability to gather the huge financial backing to complete such a deal, given that Tesla loses money, has $10.9 billion of debt and its bonds are rated junk by credit ratings agencies.

At $420 apiece, buying all of Tesla's shares would cost about $72 billion, but Morgan Stanley analyst Adam Jonas wrote in a note to investors Wednesday that he expects about $50 billion in additional net debt.

"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.

Tesla's board of directors on Wednesday sent out a message that Musk had advised the board about the potential offer, although scant information about the alleged meetings and the proposed buyback had led some to speculate that Tesla's board of directors may be backtracking to avoid fallout from SEC regulators.

SoftBank is now not interested in a deal for Tesla after earlier this year taking a stake in General Motors Co's self-driving unit, Cruise, Reuters reported earlier.

Tesla said on Wednesday the discussions had addressed the issue of how to fund such a deal, but gave no details.

"If Apple wanted to be in the auto business, this is how you do it-you step up, doesn't have to be $420 (per share), it could be another price".

It's possible Musk could persuade some large institutional investors to remain shareholders in the private company, which could reduce his funding needs, Sacconaghi said.

The deal would be the biggest leveraged buyout of all time, beating the $45 billion record set by Texas power utility Energy Future Holdings.

Buying Tesla in its entirety would cost US$72b, based on the company's outstanding stock as of July 27.

Musk laid out his reasoning for going private in an email to Tesla employees yesterday, which was subsequently posted on Tesla's website.

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

There is no evidence this was Musk's intention with his remarks on Tuesday.

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