Shares of Tesla (TSLA - Free Report) opened higher on Monday—but quickly surrendered their early gains—after Elon Musk confirmed his tweet that funding to take the company private had been secured was based on multiple and ongoing conversations with the Saudis.
Musk cleared up this question, and several others related to his stunning proposal to take Tesla private, in a blog post published Monday morning.
“Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private,” Musk wrote. “Recently, after the Saudi fund bought almost 5 percent of Tesla stock through the public markets, they reached out to ask for another meeting. That meeting took place on July 31st. ... I left the July 31st meeting with no question that a deal with the Saudi sovereign fund could be closed.”
Tesla shares gained nearly 2% at the open following Musk’s blog post. However, the stock was maintaining just marginal daily gains as of 10:15 am EDT.
Musk’s blog post is important for a number of reasons. First, it confirms reports that the Saudi sovereign wealth fund has been building a stake in Tesla—a story which first emerged just minutes before the CEO last week tweeted plans to take the electric car company private at $420 per share.
News that Musk had met with the Saudis on July 31 also confirms that the polarizing executive had been considering a go-private deal for at least a bit of time before revealing these plans on Twitter.
This should also give Musk and Tesla some defense from SEC inquiries into whether the company violated rules which bar publicly-traded companies from revealing plans to buy or sell securities if management does not actually intend to act upon those plans, does not have the means to complete such a move, or are simply trying to manipulate share prices.
The Tesla board said last week that it had held discussions about going private, but Musk today said that he felt it was necessary to make those discussions public.
“It wouldn't be right to share information about going private with just our largest investors without sharing the same information with all investors at the same time. As a result, it was clear to me that the right thing to do was announce my intentions publicly,” he wrote.
Tesla plans to meet with financial advisors this week to formalize a process to explore Musk’s go-private plan, and the board is expected to ask Musk to recuse himself from these proceedings, CNBC reported last week.
In the meantime, Tesla investors will hope that the electric vehicle giant can maintain the momentum it has generated on the back of a well-received earnings report and last week’s surprise news. Shares are up more than 22% since late July, and the company finally looks to be back in the good graces of some analysts.
Tesla has witnessed five positive revisions to its full-year EPS estimates within the past 30 days, compared to four negative revisions for that period. Looking ahead, it has seen seven positive revisions to its 2019 earnings estimates and just two negative revisions, all within the same 30-day time period.
TSLA currently sports a Zacks Rank #3 (Hold), as well as a “B” grade for Momentum in our Style Scores system.
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