STREAMING NOW: Watch Now

Could Elon Musk lose control of Tesla?

Elon Musk wants to take Tesla private and remain in control of the company. He may not be able to do both....

Posted: Aug 17, 2018 9:29 AM
Updated: Aug 17, 2018 9:29 AM

Elon Musk wants to take Tesla private and remain in control of the company. He may not be able to do both.

The plans to take Tesla private are not clear, but Musk suggested in a blog post this week he's going to need a lot of help to buy out shareholders.

If his plan succeeds, the new stakeholders will probably have a much louder voice inside Tesla than the analysts and short-sellers he despises today. They could conceivably demand changes or even his ouster.

Musk said he wants Tesla's stock to be taken private at a premium value of $420 a share, but he also expects about two-thirds of shares now held in the publicly traded Tesla to maintain their current ownership.

That suggests at least 33% of the shares would need to be repurchased before the company could be taken private. That block of stock alone is more than Musk owns or could buy by exercising his options (his stock and options are equal to about 22% of Tesla's oustanding shares). And he doesn't have a lot of free cash to make significant additional purchases, as most of his non-Tesla net worth is tied up in his other company, privately held SpaceX, according to Gene Munster, managing partner at Loup Ventures and a top tech analyst.

A Saudi-owned Tesla?

Musk also disclosed that the Saudis already own nearly 5% of Tesla shares. So Musk could depend on them to purchase only an additional 16%-or-so of Tesla shares or the Saudis would own more of Tesla than he does.

So Tesla and Musk would have to find other investors to put up the roughly $10 billion needed to take Tesla private. But that could force Musk to give a greater voice in Tesla decisions to outsiders, said Todd Boudreau, chair of private equity group at Foley & Lardner. He said the demand of private equity investors for a say in the company will increase depending upon the size of the investment they put up.

"To bring in some investors, they're going to want some control," said Boudreau. The private investors could even cause him more problems than the short sellers and analysts he disdains, Boudreau said. Exerting influence on a publicly traded company can be an expensive and difficult process involving proxy fights and board elections. But when there is a limited group of private investors who together own a controlling stake in a company, they can act much more quickly.

"If they're all on board with what you're doing, it's ideal. But the dynamic can change very quickly. In the most extreme case, he could be out tomorrow," he said.

Who will own the most shares?

Musk will probably work to make sure no one else holds more than 20% of the company, said Munster.

"We think that (someone owning more than Musk) would be a deal breaker," he said.

"Everyone is going to have to be a passive investor. Elon Musk won't let anyone be active," Munster said. "I think the point of going private is he's tired of people telling him how to run his business."

But the difficulty in finding that much passive money to put into the deal is the reason he thinks there is a one-in-three chance that the deal to take it private never gets done.

Tesla did not respond to a request for additional comment for this story.

New York Coronavirus Cases

County data is updated nightly.

Cases: 1973308

Reported Deaths: 51350
CountyCasesDeaths
Kings2611819909
Queens2604189526
Suffolk1913793303
Nassau1753923102
Bronx1731096365
New York1303844306
Westchester1245352236
Erie805561689
Richmond698671740
Monroe599441033
Orange45583782
Rockland45345941
Onondaga35576660
Dutchess27616433
Albany23409343
Oneida21291497
Niagara17888332
Broome17175348
Saratoga14222160
Ulster12835241
Schenectady12289192
Rensselaer10526136
Putnam1007991
Chautauqua8256132
Chemung7068133
Oswego690990
Ontario676591
Steuben6212141
St. Lawrence613794
Sullivan603268
Cayuga581090
Jefferson540863
Wayne515467
Cattaraugus506880
Genesee5014121
Herkimer4883107
Clinton447232
Madison425785
Tompkins401949
Fulton399786
Livingston394358
Montgomery3842114
Columbia380399
Cortland351560
Warren333756
Tioga333358
Wyoming321751
Allegany314183
Otsego313646
Greene308174
Chenango303173
Washington281355
Orleans271683
Lewis242333
Franklin237512
Delaware211936
Seneca185356
Schoharie152015
Essex148926
Yates109826
Schuyler97913
Hamilton3002
Unassigned184111
Out of NY0216
Rome
Cloudy
45° wxIcon
Hi: 48° Lo: 41°
Feels Like: 45°
Binghamton
Cloudy
45° wxIcon
Hi: 48° Lo: 39°
Feels Like: 45°
Rome
Cloudy
45° wxIcon
Hi: 49° Lo: 40°
Feels Like: 45°
Rome
Cloudy
45° wxIcon
Hi: 48° Lo: 40°
Feels Like: 45°
WKTV Radar
WKTV Temperatures
WKTV Severe Weather
Saluting Those Who Are Proud 2 Serve
Enter the Rock Your Body Giveaway from Alivana Aesthetics
Looking for work or looking to hire? Check out the WKTV Job Fair!