CEO Elon Musk’s idea of taking Tesla (TSLA) private makes sense on many grounds. Evidently, he wants to do it the SpaceX way, where he can attract huge investment from big firms and equity funds while remaining unanswerable to the public.
In a private Tesla, Musk can rule under his own terms. As long as he has investors who trust his vision, he may keep burning money till he sees profits coming his way. No tricky questions asked by short sellers, analysts or business journalists.
Musk won’t be weighed down by the burden of returning positive quarterly results, which will allow him ample time to device further strategies. He may seamlessly put the company into a slower growth trajectory, where growth is predictable and profitability is gradual. Musk is doing it with SpaceX, so he’s got the experience.
Under normal circumstances, private companies turn public so that raising money becomes easier. However, Musk’s intention of taking the company private as a C Corporation would give him unlimited shareholders, even while facing the risk of double taxation.
But who will be the institutional investors? It could be private equity funds such as Kohlberg Kravis Roberts and Blackstone Group. Apple (AAPL) may also be one, as it has already tried its luck with electric mobility. Also, it boasts of a huge cash pile, and it would make sense investing in a private Tesla.
Daiwa, Microsoft (MSFT), Goldman Sachs (GS), and Toyota (TM) also have the capacity to invest in the company.
That’s not all. Alphabet (GOOGL), China Mobile, Oracle (ORCL), Warren Buffett’s Berkshire Hathaway (BRK), and Cisco (CSCO) are also in the queue for an opportunity to make a footprint in the automobile industry. And with a private Tesla on any of their side, they would have a great advantage over the others. Despite the cash burn habits, it is widely expected that Tesla could turn its slow growth into profitability.
On Thursday, CNBC reported that Tesla’s board is planning to meet the financial advisors in the coming week to make formal the process of exploring going private. The board is expected to ask Musk to disqualify himself from the talks.