Elon's $420 a share bubble has burst: Why Tesla isn't going private anytime soon
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Earlier this week, Elon Musk’s biggest fan in the investment world urged Tesla’s founder to stop his ideas of taking the company private. Catherine Wood of ARK Invest re-iterated her bullish earlier projections in an open letter on the money manager’s website where she reckons the company’s shares will be worth anything from $700 to $4,000 in five years.
Musk, you may recall, threw any number of cats among Wall Street’s pigeons at the beginning of the month tweeting that he intended taking the company private at a price of $420 a share. After peaking fractionally below $380, the price has since fallen back to its current $320. Below the pre-tweet level and a long way from the “funding secured” price.
So far, those who bet against Musk have been the big winners, with disclosed short sellers of Tesla stock making over $1bn in profit since his bombshell tweet. These cynics think Ms Wood’s valuations are a figment of an alternative reality. But where they do agree, although for different reasons, is that it’s very unlikely that Tesla will be going private.
The main reason is that Saudi Arabia’s Public Investment Fund, on which Musk is pinning his buyout hopes, doesn’t actually have the money to help him out - even if it wanted to pay $100 a share more than the current market price. The London Financial Times reported this morning that the Saudi Public Investment Fund has lined up a consortium of global banks to lend it $11bn simply to meet existing obligations. The PIF is quite clearly no white desert charger riding to Elon’s rescue… That’s the last bit of news Musk needs right now. Because a buyout by the Saudis was the only elegant way out of some very serious legal consequences of his ill advised tweet.
Musk, you may recall, threw any number of cats among Wall Street’s pigeons at the beginning of the month tweeting that he intended taking the company private at a price of $420 a share. After peaking fractionally below $380, the price has since fallen back to its current $320. Below the pre-tweet level and a long way from the “funding secured” price.
So far, those who bet against Musk have been the big winners, with disclosed short sellers of Tesla stock making over $1bn in profit since his bombshell tweet. These cynics think Ms Wood’s valuations are a figment of an alternative reality. But where they do agree, although for different reasons, is that it’s very unlikely that Tesla will be going private.
The main reason is that Saudi Arabia’s Public Investment Fund, on which Musk is pinning his buyout hopes, doesn’t actually have the money to help him out - even if it wanted to pay $100 a share more than the current market price. The London Financial Times reported this morning that the Saudi Public Investment Fund has lined up a consortium of global banks to lend it $11bn simply to meet existing obligations. The PIF is quite clearly no white desert charger riding to Elon’s rescue… That’s the last bit of news Musk needs right now. Because a buyout by the Saudis was the only elegant way out of some very serious legal consequences of his ill advised tweet.
