Tesla (NASDAQ:TSLA) shares soared 7% Tuesday after CEO Elon Musk tweeted that he was considering taking the financially struggling automaker private at $420 and has secured funding to do so.
Musk also stated on Twitter: “My hope is *all* current investors remain with Tesla even if we’re private. Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity’s SpaceX investment […] I’m super appreciative of Tesla shareholders. Will ensure their prosperity in any scenario.”
At $420 per share, a deal would implies nearly 23% premium to Tesla’s closing price Monday, making it one of the biggest go-private deals with a price tag of about $72 billion. Tesla has been public since 2012 and currently has a market cap of over $60 billion.
Canaccord analyst Jed Dorsheimer commented, “This tweet epitomizes the reason we have a HOLD rating on Tesla shares and not a Buy. If true, and his account was not hacked, this reinforces the rationale behind our market neutral stance. As the company matures or on pullbacks we would look to become more constructive but remain on sidelines at current levels.”
Elazar’s Chaim Siegel added, “I believe Tesla considers Tweets as public disclosure. I think he’s serious. Plus this is short squeeze rocket fuel after a nice quarter.”
The initial tweet came shortly after several media outlets reported that Saudi Arabia’s sovereign wealth fund, overseen by Crown Prince Mohammed bin Salman, has built an undisclosed stake of between 3% and 5% stake in the electric car giant.
Overall, Wall Street is not convinced that Musk’s electric empire’s reward is worth all the risk, especially when taking note that TipRanks analytics exhibit TSLA as a Hold. Based on 24 analysts polled in the last 3 months, 10 are bullish on Tesla stock, 6 remain sidelined, while 8 are bearish. The 12-month average price target stands at $313.15, marking a nearly 15% downside from where the stock is currently trading.