Final Trade Detail

Tesla

Investors who followed this trade Generated a

25.6% Return

Open Date

8/13/18

Close Date

10/5/18

Hold Time

52

Buy Price

355.89

Close Price

264.79

%Gain/Loss

25.6%

Original Recommendation

Tesla

Tesla (TSLA)

our opinion

sell

current price

$355.89

target price

$275.00

market cap

$56.1B

div yield

0.00%

  • Softbank has declared it is not interested in taking Tesla private.
  • Saudi Arabia's Public Investment Fund is a potential buyer of Tesla, but we're wary of the timeline for this to take place.
  • Short sellers will likely take this opportunity to push the stock price lower. A buyer would never take Tesla private for $420/share if it's trading for $300.

trade details

Elon Musk has apparently secured funding to take Tesla private at $420/share. That would require roughly $72 billion in capital. Not one party came forward to declare they were interested in participating in a private deal for Tesla. This begs the question whether this is another attempt by Musk to burn short sellers. (Roughly 27% of its current float is shorted.) Let’s examine how it may be possible for Musk to take Tesla private.

Saudi Arabia Public Investment Fund
Saudi Arabia has accumulated close to $2 billion in Tesla shares. We could surmise that the world’s biggest crude oil producer may be interested in hedging against oil by investing in an electric car company. Investing $2 billion isn’t quite $72 billion, however, the PIF is estimated to grow into a $2 TRILLION dollar fund. $72 billion is merely a splash in the fund’s giant pool of wealth. It wouldn’t surprise us if the technology-focused fund was the primary source of funding to take Tesla private.

Softbank
Softbank has stated that it is going to increase its investment in alternative energy. They are not interested in taking Tesla private according to sources, but the deep pockets of Softbank make it a legitimate contender.

Debt
This is very unlikely. Tesla’s credit spreads are already nearing all-time highs, meaning the likelihood of a credit downgrade is possible. An investor’s appetite for $72 billion in Tesla debt is non-existent.

We are reiterating our sell rating on Tesla’s shares. Investor lawsuits are mounting against Tesla and the street is skeptical that Musk can finalize a deal to take the company private. If Musk and Tesla’s Board of Directors do not finalize a plan to take the company private in the next 60-90 days expect a drastic sell-off.