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.

Terre Haute
Clear
65° wxIcon
Hi: 80° Lo: 46°
Feels Like: 65°
Robinson
Clear
59° wxIcon
Hi: 81° Lo: 45°
Feels Like: 59°
Indianapolis
Clear
60° wxIcon
Hi: 77° Lo: 49°
Feels Like: 60°
Rockville
Clear
64° wxIcon
Hi: 79° Lo: 45°
Feels Like: 64°
Casey
Clear
64° wxIcon
Hi: 79° Lo: 48°
Feels Like: 64°
Brazil
Clear
65° wxIcon
Hi: 79° Lo: 46°
Feels Like: 65°
Marshall
Clear
65° wxIcon
Hi: 80° Lo: 44°
Feels Like: 65°
Mostly clear, breezy, and warmer evening.
WTHI Planner
WTHI Temps
WTHI Radar

Latest Video

Image

Historical Marker Dedication in Wabash Valley

Image

Historical Marker Dedication

Image

Elizabeth Smart Story

Image

Sunday Evening: Mostly clear, breezy. Low: 61

Image

Cooper Neese Inaugural Basketball Camp

Image

Sunday: Sunny and warm, becoming breezy. High 80°

Image

Wabishiki Day

Image

The Great Relay

Image

Fairbanks Community Center

Image

Car Seat Safety

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Cases: 1612129

Reported Deaths: 27216
CountyCasesDeaths
Cook61543610987
DuPage1042681360
Will876561092
Lake773641061
Kane66108852
Winnebago39170545
Madison38345578
St. Clair35140571
McHenry33177317
Peoria26076363
Champaign25967184
Sangamon24718273
McLean22003208
Tazewell19833326
Rock Island17919348
Kankakee16856235
Kendall15537107
Macon14565244
LaSalle14539278
Vermilion13343190
Adams12733148
DeKalb11729129
Williamson11528160
Whiteside7944176
Jackson774389
Boone762782
Coles7404113
Ogle718087
Grundy704582
Franklin693999
Clinton683798
Knox6715166
Marion6581138
Macoupin6525100
Henry625674
Effingham612882
Jefferson6116132
Livingston574196
Woodford556191
Stephenson549789
Randolph532197
Monroe510199
Christian496380
Fulton491570
Morgan488996
Logan478474
Montgomery470476
Lee460658
Bureau429188
Perry416671
Saline414064
Fayette403459
Iroquois396973
McDonough356656
Jersey324253
Shelby317343
Crawford307930
Douglas307636
Lawrence303431
Union297347
Wayne276057
White267730
Richland264455
Hancock258834
Pike258056
Clark253538
Cass252228
Bond244824
Clay242247
Edgar237545
Ford235956
Warren227161
Carroll226537
Johnson214925
Moultrie212931
Jo Daviess207226
Washington206627
Wabash202616
Greene200939
Mason200351
Massac200144
De Witt196830
Piatt192114
Mercer191234
Cumberland179825
Menard160812
Jasper153418
Marshall135621
Hamilton129821
Brown10228
Pulaski99211
Schuyler9748
Edwards96815
Stark77227
Gallatin7557
Scott6975
Alexander68111
Henderson66114
Calhoun6452
Hardin56414
Putnam5464
Pope4945
Unassigned1812432
Out of IL60

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Cases: 947918

Reported Deaths: 15377
CountyCasesDeaths
Marion1291181990
Lake635721103
Allen53899761
Hamilton44082449
St. Joseph42122590
Elkhart33803491
Vanderburgh30574449
Tippecanoe26915251
Johnson23727418
Hendricks22410342
Porter21832347
Clark17562231
Madison17492385
Vigo16302285
Monroe14545191
LaPorte14389239
Delaware14183222
Howard13971273
Kosciusko11498135
Hancock10935166
Warrick10737178
Bartholomew10635170
Floyd10514208
Wayne10077226
Grant9213204
Morgan8928160
Boone8463111
Dubois7791123
Dearborn769490
Henry7691133
Noble7466101
Marshall7409128
Cass7219118
Lawrence7026153
Shelby6647111
Jackson661386
Gibson6190107
Harrison609386
Huntington604495
Montgomery5853105
DeKalb581091
Knox5535104
Miami548888
Putnam543268
Clinton537465
Whitley529354
Steuben501768
Wabash488692
Jasper483861
Jefferson474492
Ripley457777
Adams446068
Daviess4231108
Scott409165
Clay394957
White393858
Greene393392
Wells389884
Decatur388797
Fayette378578
Posey362341
Jennings356056
Washington334747
LaGrange325175
Spencer321136
Fountain318455
Randolph317190
Sullivan309449
Owen287064
Starke282864
Fulton280454
Orange277859
Jay257038
Perry254152
Carroll245229
Franklin242838
Rush237030
Vermillion235050
Parke221420
Tipton212055
Pike211740
Blackford170534
Pulaski168551
Crawford147318
Newton145845
Benton143916
Brown135846
Martin130217
Switzerland126910
Warren115616
Union98511
Ohio80511
Unassigned0482