While Tesla shares sank Monday amid growing doubts about Elon Musk’s plan to take the electric carmaker private, the chief executive officer’s Twitter followers focused on the personal aspects of the Wall Street drama: whether he’s sleeping enough and the status of his relationship with indie musician Grimes.
The question of Musk’s downtime was driven by an open letter from Arianna Huffington, founder of HuffPost and author of a recent book on sleep, advising the billionaire entrepreneur that he needs more of it.
The future of Tesla, which is still trying to achieve profitability and grappling with regulatory questions about funding for Musk’s buyout plan, “depends on you coming up with your masterpiece,” Huffington wrote after Musk described working 120-hour weeks to the New York Times and spending his entire 47th birthday at Tesla’s factory. “It doesn’t depend on how many hours you’re awake.”
Tesla, not to mention Musk himself, “would be better off if you regularly built in time to refuel, recharge and reconnect with your exceptional reserves of creativity and your power to innovate,” she said in the missive, published Friday on the website of her Thrive Global business.
Musk — unsurprisingly, given his comments to the Times — demurred, gaining support from social media followers not distracted by media reports about links, or the lack of them, between him and Grimes on Twitter and Instagram.
“I just got home from the factory,” he replied to a tweet from Huffington, noting that Tesla and Ford Motor Co. are the only two U.S. carmakers to have avoided bankruptcy. “You think this is an option. It is not.”
Ford & Tesla are the only 2 American car companies to avoid bankruptcy. I just got home from the factory. You think this is an option. It is not.
— Elon Musk (@elonmusk) August 19, 2018
Tesla has been under pressure to attain profitability and generate cash after losing $1.43 billion, or $8.42 a share, so far this year. Musk recently told investors that he expected to reverse the losses in the three months through September and remain profitable afterward.
The buyout plan he proposed in early August, he said, would enable the Palo Alto, Calif.-based company to focus on long-term success without the pressure to meet quarterly earnings targets or the possibility of wild share-price swings due to investors betting against Tesla. Funding had been secured, Musk said on Twitter, for an offer of $420 a share.
JPMorgan Chase analyst Ryan Brinkman, who initially took Musk at his word pending further details, said in a note to clients on Monday that information disclosed since “leads us to believe that funding was not secured for a going-private transaction, nor was there any formal proposal.”
Days after Musk’s initial Twitter posts, the CEO said in a blog post on Tesla’s website that Saudi Arabia’s sovereign wealth fund, which holds a 5 percent stake already, had repeatedly recommended taking the company private and was interested in funding the deal.
His understanding from the investor that no other approvals were needed was the basis for his Aug. 7 tweet that funding for the transaction had been secured, Musk said, a comment that the Wall Street Journal reported had drawn the attention of the Securities and Exchange Commission.
The SEC has declined to comment. Corporations making such announcements typically do so via press release, either before or after the New York Stock Exchange’s regular trading hours of 9:30 a.m. to 4 p.m., not on social media. “I felt it was the right and fair thing to do so that all investors had the same information at the same time,” Musk said.
The proposed $420 offer represented a 23 percent premium to Tesla’s Aug. 6 price of $341.99, but it raised eyebrows since the number is also a euphemism for marijuana smoking. Tesla soared 11 percent in the immediate aftermath of Musk’s tweets, reaching $379.57, but has since given up all of those gains and more.
The shares fell another 0.8 percent on Monday to $303.13, as JPMorgan’s Brinkman cut his 12-month price target back to $195.
“Tesla does appear to be exploring a going-private transaction,” he wrote, “but we now believe that such a process appears much less developed than we had earlier presumed.”
Musk has said he’s working with financial advisers, including Goldman Sachs and Silver Lake, and Tesla’s board formed a special committee of independent directors to evaluate the proposal, but emphasized that it had yet to receive a formal offer.
The three-member panel, composed of Brad Buss, Robyn Denholm, and Linda Johnson Rice, will hire a financial adviser if and when an offer is made, the board said in a regulatory filing on Aug. 17.
Such committees are typically formed to avoid conflicts of interest when a company officer is involved in a transaction. Tesla’s committee has the board’s authorization to review and negotiate alternatives to any proposal, and its approval will be required for any deal.
“When Mr. Musk tweeted on Aug. 7 that, ‘Only reason why this is not certain is that it’s contingent on a shareholder vote,’ we had presumed that a formal proposal had been received from another party, that funding had been secured for that formal proposal, and that the board was at least informally supportive of the formal proposal,” Brinkman wrote. His updated interpretation is “that none of these three presumptions are currently the case.”
