“Funding secured.”
Two words that generally usher in equal parts relief and celebration – with that utterance, Elon Musk brought his purported plan to take Tesla private to a new level.
At $420 a share, Tesla’s enterprise value is just over $80 billion – which is a lot even if you say it quickly. But, Tesla is not just a car company – recall that it bought SolarCity in 2016, a company whose largest shareholder and Chairman was Elon Musk and was at the time of acquisition run by two of Elon’s cousins, Lyndon and Peter Rive. So those on-board the world’s largest buyout should remember that are getting a solar energy company as well as a maker of electric cars.
This is probably not a good thing.
Tesla's energy storage and generation unit accounted for 9.4% of Tesla's revenues in the second quarter, but only 7.1% of consolidated gross profit – and SolarCity's debt represents an outsized proportion of Tesla's capital structure. In New York, despite a $750 million investment, Gigafactory 2 is also off to a disappointing start. The upshot is that an investor in a Tesla go-private transaction would have to come to terms with the fact that a massive manufacturing facility in Buffalo – and its contingent liabilities – comes with that purchase.
As you try to wrap your head around the prospect that outside investors would pay 25x 2019 EBITDA for a car company, remember that given the few public documents and the lack of information that merger arbitrageurs live for – known as "rumortrage” – it is very hard to take Musk’s tweets seriously. If his mission was to incinerate Tesla short-sellers, he certainly accomplished that (back in May, he tweeted that the "short burn of the century" was coming soon), but if his mission was to launch the largest leveraged buyout in history of all things finance, well, there is some way to go – it is hard to imagine in 2018 that someone could raise $66 billion (the total enterprise value minus the value of his stake) in total secrecy.
But, let's not discount him entirely, the name 'Elon Musk' does have a certain Bond villainous quality to it after all.
