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What Wall Street Is Saying About Musk Taking Tesla Private

Tuesday afternoon, Tesla Inc TSLA CEO Elon Musk casually tweeted his intent to explore a go-private path for the controversial automaker. After a mid-session halt, Tesla’s stock closed up 10.3 percent.

Here’s what analysts had to say about the startling, unclear message.

It Makes Sense

Musk said in his email to employees that going private eliminates pressures driving myopic decisions, the distraction of stock volatility and short-sale incentives for “attackers.” Canaccord Genuity called the strategy “brilliant.” Evercore ISI said it makes sense.

“Traditionally, public markets have been there to provide a source of funding (note, we also believe they bring scrutiny and accountability which in many cases does lead to better practice),” Evercore wrote. “However, if a company does not need that funding or is able to source future funding privately, then there is no obvious reason for it to remain public.”

Evercore added that private funding might deepen Tesla’s pockets for faster international growth and buffer the firm against the next U.S. or capital markets recession. Morgan Stanley confessed similar positives.

“The scale and scope of launching an auto company while providing a focused internal narrative to employees and stakeholders on the goals of the enterprise may be better aligned outside of the eye of the public market with a longer-term horizon,” Morgan Stanley wrote.

And, the analysts said, an exit is better done now than later. Tesla isn’t expected to suffer significant challenges in electric vehicles for at least a few years, which means it’s currently at peak position to attract capital or pursue strategic alternatives.

Source

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