Tesla says it's staying public
Elon Musk announced late on Friday after markets closed that he won't be taking Tesla private.
In a blog post attempting to minimize the damage, Musk tried to spin it as a decision that was made because shareholders want to stay a public company and that taking it private would be more time-consuming than he anticipated.
No one outside of the biggest Musk fanboys believes it.
There was no 'funding secured' and somehow rapper Azaelia Banks comes out of this as the only winner after she capped screenshots from Musk's (former?) girlfriend Grimes.
This is truly one of the most-bizarre sagas of all time. Musk is already facing three class action lawsuits and this is just the beginning. The SEC is investigating and will look like a farce if something isn't done.
On the 'funding secured' line, here is what Musk had to say: "My belief that there is more than enough funding to take Tesla private was reinforced during this process."
It's abundantly clear that nothing was ever secured but maybe he can get the Saudis to say they had initially promised to provide the funding -- if only to salvage their own investment.
So what's next?
If this news had hit during market hours, it would be mayhem. Tesla is betting that some extra time will result in a kinder outcome. That's usually the case but only to some extent.
To me, that $250 spike low level looks like a big bullseye on the chart and with risks to the downside over time. In the short-term, the $287 level was the pre-and-post 'funding secured' low. It was clear to almost anyone who was paying attention this wasn't going to happen so it might not be the carnage many expect and that level could put up a fight in the early going.
I'm not an equity analyst but this company is burning through cash and will need to raise more. To fight back against the shorts, they're going to need to recapitalize at some point and it's going to have to be via selling equity. Evidently the Saudis were willing to do it previously but I'd imagine this saga has damaged their confidence in Musk and the company. Still, some kind of equity raise could be a positive catalyst.
In the short-term, it's going to be a mess of fear and some misguided greed but in the long term, a company needs to make money or it's going to zero. There are all kind of rumors about suppliers not being paid and unhappy customers.
Musk is also on some kind of personal implosion whether it's due to drugs, exhaustion or something else is anyone's guess. The board will undoubtedly try to find some kind of COO to shore up confidence and an announcement along those lines before Monday's open could cushion the fall.
The problem now is less about the worries of the fallout from this but about what other bad news is lurking around the corner. One more bad headline will really send this company into freefall.
As for related markets, the Sept 21 $300 puts closed on Friday right around $10 and I imagine there are a few option holders feeling awfully good.
I can't get a chart of the more-thinly traded Aug 31 $300 puts but the last trade on those was $2.14 Friday and those could easily trade up 25x on Monday.
I hope your weekend is as great as whoever owns those and as Azealia Banks says, don't get on twitter on acid, especially if you're the CEO of a public company.
