Wall Street sees funding hurdle to Musk's plan to take Tesla private

CEO and lead designer at SpaceX and co-founder of Tesla speaks at the International Space Station Research and Development Conference in Washington

CEO and lead designer at SpaceX and co-founder of Tesla speaks at the International Space Station Research and Development Conference in Washington

Musk took Tesla shareholders and the stock market by surprise on Tuesday by announcing on Twitter he was considering taking the loss-making electric car-maker private at $420 United States a share.

Tesla's shares were down less than one per cent at $376.31 U.S. in morning trading on Wednesday after closing up 11 per cent at $379.57 United States on Tuesday.

Six of Tesla's board members issued a statement Wednesday morning confirming that they have been in discussions with CEO Elon Musk about taking the company private.

"If the market believes that Elon Musk's financing is in place and the chances of a buyout is high, we should see short covering in size, driving Tesla's stock price higher in the short term as short sellers attempt to close out their positions at lower than the $420 takeout price", said Ihor Dusaniwsky, a managing director at S3 Partners.

Some Wall Street analysts are skeptical of Musk's ability to gather the financial backing to complete such a deal.

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The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia's Public Investment Fund (PIF), which sources said on Tuesday had taken a stake of just below 5 percent in Tesla, or a major technology investment fund such as SoftBank Group Corp's Vision Fund, bankers said.

Musk later tweeted that existing stockholders could choose whether to hold onto their shares or sell them to the new investors for $420 a share.

"Last week, Elon opened a discussion with the board about taking the company private", the board members wrote.

The brief statement by six of the nine board directors said that the discussions about taking the company private had also "addressed the funding for this to occur". Tesla's other board members are Musk, his brother Kimbal Musk and venture capitalist Steve Jurvetson.

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