Quoted from robertmee:Ok, business experts and Tesla supporters....is this good, bad, crazy, or brilliant? I'm shocked, but really don't know what to think. Any precedent for a large company to do this?
Edit: Answer my own question....Dell computer, Panera Bread, Burger King and Heinz.
I'm no expert, but I see no possible way for this to be done (as Musk describes) without a massive injection of tens of BILLIONS.
The first thing that caught my eye was the $420/share buyout figure. The first thing you have to do is calculate how many people have to be bought out - how many people hold shares. Luckily, this figure, called "free float", is readily available on most financial web sites.
I just looked it up and TSLA is reporting a free float of 126.03 million.
126.03 x 420 = $52.93 BILLION
Also, TSLA has a net debt of around $8.8 BILLION
So, right out of the gate, you are going to have to raise around $61 BILLION, and we haven't even begun to talk about free cash flow, working capital, or debt service.
LBOs are generally very complex, as there is a massive amount of cash involved. So the vast majority of money has to be borrowed. So the lending entities start looking at things like the aforementioned FCF and debt service.
The bottom line - would you borrow $60+ BILLION dollars to a car company that is losing $8-16 million dollars a day?