On Monday, the trade of Tesla shares in Germany pointed to a drop of 5 percent. The sudden fall in the value of shares came up when U.S. markets open as investors reacted to the decision of Chief Executive, Elon Musk, of abandoning plans to take the luxury electric car maker private.

On Friday, through a blog post, Musk said that consultations done with the help of Goldman Sachs and Morgan Stanley had shown most of Tesla’s existing shareholders opposed the deal he proposed on Twitter three weeks ago to widespread shock on Wall Street.

The shares of Tesla had already gone down by nearly 10 percent from their level on August 7, just before Musk tweeted that he had “funding secured” for a buyout at $420 a share.

The Investors of Tesla bonds and convertible debt had also shown skepticism that the tens of billions of dollars needed for the buyout would materialize after the Aug. 7 tweet and a subsequent blog post in which Musk made the case for going private.

With the Silicon Valley billionaire’s proposal for a buyout backed by Saudi Arabia’s sovereign wealth fund off the table, investors will focus on Tesla’s efforts to become profitable, the company’s cash reserves and what steps Musk could take to raise fresh capital.

Musk and Tesla also face a series of investor lawsuits and the threat of a U.S. Securities and Exchange Commission investigation into the factual accuracy of Musk’s tweet that funding for the buyout deal was “secured”.

Tesla had $2.78 billion in cash at the end of the second quarter, after a record $718 million loss.

In early August, before the buyout plan was made public, Tesla reiterated a forecast that it would achieve a profit in the third and fourth quarters, under normal accounting rules, and Musk said the company would not need to raise more cash.

A Tesla spokesman on Sunday referred to those previous comments.

One of Tesla’s biggest challenges is ramping up production of its latest vehicle, the Model 3, which is critical to its profitability goals.

Analysts have suggested a capital raise may be required soon to boost investor confidence.

Musk and Tesla could hold off on any fundraising plans for the time being, in part because tapping capital markets would contradict Musk’s comments about Tesla being adequately funded, investment bankers who are not working for the company said over the weekend.

This week would also be an inopportune time for a capital raising, given that many bankers and investors are away ahead of the September 3 Labor Day holiday.

The high price investors have put on Tesla’s shares has allowed Musk to expand U.S. production, invest in building out a vehicle charging network and start work on new models including a small sport utility vehicle, a new Roadster and a semi-truck even as the company burned cash.

Tesla earlier this year had also announced plans to build a battery and vehicle assembly complex in China. Musk said that the company’s “default plan” would be to fund that expansion by borrowing money from the banks of China.

Mia Noles
Mia Noles is a writer at the Ode Magazine. She holds a Bachelor of Arts English Literature Degree from Leeds University. Her specialty is Celebrity News, History, and World News. She is also a life enthusiast who loves traveling the world and taking part in humanitarian courses. You can contact her at mia@odemagazine.com.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.