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Tesla : To go private or not to go private...

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08/09/2018 | 09:55am EST

That is the question after Elon Musk tweeted earlier this week that he wanted to take Tesla private at $420, declaring that financing was secured. The Tesla founder said that as a private company, it would be able to focus on the business rather than quarterly earnings.

Is going private the right move for Tesla ? Nobody knows for sure, but we can always look at a few well-known companies that did it in the past...

One of the most well-known delisting is certainly Dell, who decided to go private in 2013 in a $24.4 billion transaction. However, things didn't go as well as expected: while the company increased revenue growth, it is still losing money. In particular, Dell suffered from the shift from laptops to tablets and other mobile devices. In July, the PC maker announced  that it is planning to go public again.

In 2010, 3G Capital took Burger King private, constructing an IPO with Pershing Square Capital lead by Bill Ackman. But, in 2012, the company went public again.

Heinz, the world-leader of the packaged food industry, was delisted from NYSE in June 2013. It was acquired for more than $28 billion by an investment consortium comprising of Berkshire Hathaway. In 2015, Kraft Foods Group announced a merger deal with H.J. Heinz financed in part by Warren Buffett, which took the company back to the stock market.

Hilton, the leading global hospitality and hotel chain, was bought by Blackstone Group in 2007 for $26 billion, and was eventually delisted from the NYSE. It allowed the compay to renegotiate its debt, and expand internationally. However, the company went public again in 2013.

As you can see in these examples, they all eventually came back. Yes, privatization offers many benefits : it is freeing up management's time and effort to concentrate on running and growing a business as there is much fewer regulation to comply with, and no quarterly earnings or short sellers to deal with. But it can also mean being under strong pressure from the new private owners, who might set tough targets and tight deadlines.

However, it might be the right move right now for a company like Tesla, which is taking a long view and is driven by the idea to shape the future of mobility. "As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla," Elon Musk wrote in a memo to Tesla employees. "Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term."

And who knows, it may come back to the market in an even better shape in a few years time ...
Stocks mentioned in the article
ChangeLast1st jan.
BURGER KING HOLDINGS, INC. --End-of-day quote.
DELL TECHNOLOGIES 0.00%-End-of-day quote.0.00%
HILTON WORLDWIDE HOLDINGS INC 1.50% 73.08 Delayed Quote.1.78%
TESLA -12.97% 302.26 Delayed Quote.-9.18%
THE KRAFT HEINZ COMPANY 0.96% 47.53 Delayed Quote.10.43%

Romain Fournier
© MarketScreener.com 2018
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Financials ($)
Sales 2018 21 353 M
EBIT 2018 287 M
Net income 2018 -1 015 M
Debt 2018 7 636 M
Yield 2018 -
P/E ratio 2018 -
P/E ratio 2019 126,95
EV / Sales 2018 2,79x
EV / Sales 2019 2,07x
Capitalization 51 908 M
Duration : Period :
Tesla Technical Analysis Chart | MarketScreener
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Technical analysis trends TESLA
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 31
Average target price 335 $
Spread / Average Target 11%
EPS Revisions
Elon Reeve Musk Chief Executive Officer
Robyn M. Denholm Chairman
Deepak Ahuja Chief Financial Officer
Jeffrey B. Straubel Chief Technology Officer
Gary Clark Chief Information Officer
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