SpaceX owner and Tesla CEO Elon Musk walks the red carpet for the 2020 Axel Springer Awards on December 1, 2020 in Berlin, Germany.
Britta Pedersen | Getty Images
It’s not often that a company receives a takeover offer equivalent to an 18% call premium, only to see its stock plummet in the news.
That’s exactly what happened on Thursday after Tesla CEO Elon Musk submitted an offer to buy the company for $54.20 a share, or about $43 billion. Shares fell 1.7% to close at $45.08 with a market capitalization of $34 billion.
In other words, investors do not expect the deal to go through. Analysts at Stifel went so far as to downgrade the stock to sell on Thursday, saying the company was facing a “real Elon circus.”
Of course, Musk has legions of followers and has become legendary in the tech world for simultaneously turning Tesla and SpaceX into fast-moving, truly innovative companies. But years of bluster, hype and broken promises have left Wall Street skeptical of Musk’s intentions and his ability or willingness to go through with it, especially when it comes to big financial deals.
Remember “secured funding”. It was a tweet sent by Musk in August 2018 indicating that he was willing to buy back Tesla at $420 per share for weed enthusiasts (in case that helps explain the $54.20 offer). It’s also the tweet that led to the SEC’s legal action and final settlement requiring the “nanny” to pre-approve all Musk’s tweets containing information about the company that could affect the share price.
Tesla was never privately owned, but instead turned into one of the biggest bets on the stock market over the next three years. Adjusted for the split, the stock is up more than 1,300% since the tweet.
In the process, Musk became fabulously wealthy, surpassing Amazon’s Jeff Bezos as the richest person in the world. And by running his two main businesses and managing others on the site, he has found enough time to be a regular contributor to the site, where he now has 81.7 million subscribers.
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Tesla shares after ‘funding secured’ tweet
is Musk’s favorite form of mass communication for everything from selling crypto tokens to criticizing politicians. He also continues to make claims about Tesla technology on the site. And more recently, it has become his favorite place to criticize himself for what he sees as a disregard for the principles of free speech and certain technological restrictions.
But buy a company? Analysts don’t see it.
“While we agree with Mr. Musk’s assessment that this is an under-monetized platform, we expect the board of directors and major shareholders to resist the proposal due to philosophical differences,” wrote Mizuho Securities analysts, who have a market-equivalent rating. holding. . Stock. Analysts say the board’s “limited time that Mr. Musk has to focus on as he is the CEO of various technology companies, including Tesla, SpaceX and The Boring Company” could be of major concern to the board of directors, analysts say.
Then there is money. Musk is worth about $265 billion, according to Forbes, but nearly all of his fortune is tied to his stakes in Tesla and SpaceX. At the end of 2021, he sold more than $12 billion worth of Tesla shares, still a fraction of the $43 billion offering price.
Prior to filing, Musk bought 9.1% of the company’s outstanding shares this year for more than $2.6 billion. Shares soared 27% on April 4, the day Musk first disclosed tangible property.
“My offer is my best and last offer, and if it is not accepted, I will have to reconsider my position as a shareholder,” Musk wrote in his proposal to the board of directors on Thursday.
Musk said in a SEC filing that he hired Morgan Stanley as a financial advisor, but made no mention of partnering with other financiers or companies that could help pay the bill. Later Thursday, Musk admitted he wasn’t sure “if he could actually buy .
At the TED2022 conference in Vancouver, TED’s Chris Anderson asked Musk if there was a “plan B” if the proposal was rejected. Musk replied, “Yes,” but declined to elaborate.
Anderson asked if Musk had “solid funding”, alluding to the infamous tweet about Tesla going private.
“I have enough assets,” Musk said. “I can do it if possible. »
Whether or not Musk makes a really serious offer to buy the social media company, he’s a big distraction for the board as they now have to consider the offer. The board met to discuss the proposal on Thursday, and CEO Parag Agrawal reportedly told employees that the company is not “hostage” to Musk’s proposal.
Judging by the reaction of stock prices, investors on the side of Agrawal may be on his side. David Trainer, CEO of research firm New Constructs, said the proposal was Musk’s “desperate attempt at garnering attention” rather than an honest attempt to add value.
“He only offers to buy because that’s where Musk is most popular,” Trainer wrote in an email Thursday. “Elon Musk does not provide any operational value to shareholders, other than his rock star status, which is not enough to transform in the long term. »
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