Tesla Zaps Go-Private Plans; Wall Street Reacts

A monthlong firestorm over whether Tesla, Inc. TSLA would attempt a go-private transaction — launched with a tweet that drew the Securities and Exchange Commission's attention — ended late Friday with a statement from CEO Elon Musk that the electric vehicle maker would remain public. The sell-side weighed in on the latest development Monday. 

What Happened

The initial announcement was followed with skepticism regarding both the feasibility and legality of the decision.

Just a few short weeks after his proposal, Musk abandoned his plans for the buyout. Numerous analysts and industry leaders have since shared their views on the CEO’s erratic behavior and its effect on the company.

The Feedback

Jefferies analyst Philippe Houchois said he anticipates Tesla shares will take a hit soon due to Musk's erratic corporate behavior. Yet the press may lead to potential discussions with other investors, Houchois said.

“In any scenario, we think Tesla needs new capital to fund midterm growth or risk a de-rating of its valuation multiples,” he said.

Oppenheimer analyst Colin Rusch said Friday's announcement “removes a large distraction that had significant chance of failure and the potential to severely limit TSLA’s access to capital while attempting to execute on its ambitious product strategy.”

Tesla will likely shift its attention back to its cash flow and the Model 3, Rusch said. 

Baird analyst Ben Kallo reiterated the seemingly unanimous view that remaining public is positive for stakeholders.

The proposed go-private share value of $420 was an insufficient incentive for investors to support going private, the analyst said. 

Tesla should be able to fund itself sufficiently using self-generated capital if it meets production targets, Kallo said. 

Tigress Financial analyst Ivan Feinseth referred to the past few weeks as “an exciting roller coaster to watch.”

The analyst remains neutral on the stock and said its high volatility makes it difficult for many investors to own. 

“I do believe that trade opportunities exist on pullbacks,” Feinseth said. “Also, what fun would it be if Tesla went private as it continues to be exciting to watch Elon Musk’s and the company’s progress.”

Loup Ventures’ Gene Munster authored a blog post on rumors of an Apple Inc. AAPL acquisition of Tesla.

“If Tesla successfully turns the corner to profitability, the combination of the two companies is nothing more than a fairy tale, as both companies would want to retain design control. Our bet is that Tesla is successful and reaches sustained profitability in a year.”

If Tesla fails, Apple gains a competitive advantage and will likely become a strategic buyer or investor, Munster said.

What's Next

Each analyst noted the importance of Tesla’s refocus on production and profitability.

With the SEC reportedly investigating Musk's Aug. 7 tweet and skepticism surrounding the company's operations and management, this is a critical time for Musk and Tesla itself. 

Tesla shares were were trading down 1.86 percent to $316.80 at the time of publication Monday.

Related Links

KeyBanc: What Bulls, Bears Like In Tesla's Q2

The Investor Reaction To Tesla's Earnings Call 'Doesn't Make Any Sense' To This Trader