Going Private - Date Predictions

[bugs9876]

Hey Guys,


Any predictions as to target "going private" date? Or perhaps whenever Elon Musk will reveal one in a tweet? I know a lot of us curious.


Some analysts say this will take several months, but other think it could be sooner. Elon has been pretty forth-coming in recent tweets, so hopefully we hear something soon.


Any predictions on dates?

 

[neroden]

Deal structure designed by late September, arguing over price with Saudis and others for several months, submission to shareholders maybe January, attempt to get it through before 4th quarter financials are published in February. That's just a wild guess.

 

[DOCAL]

April / May 2019

 

[bugs9876]

Yeah good call neroden / DOCAL, early-mid 2019 makes sense given all the hassel. Any submission before 2019 would likely be overly optimistic.

 

[bdy0627]

Deal structure designed by late September, arguing over price with Saudis and others for several months, submission to shareholders maybe January, attempt to get it through before 4th quarter financials are published in February. That's just a wild guess.

Do you think they will release some information about the deal structure once that has been worked out? Maybe once the Board receives a formal proposal? Can the Board receive a proposal while the details are still being worked out?

 

[adiggs]

Deal structure designed by late September, arguing over price with Saudis and others for several months, submission to shareholders maybe January, attempt to get it through before 4th quarter financials are published in February. That's just a wild guess.

This timeline sounds reasonable to me. What I lack the background to evaluate, but worry about nonetheless, are the odds / likelihood that this timeline can be sped up so that shareholders are voting before Q3 financials are published. Any thoughts on that?

 

[generalenthu]

A lot of these merger arb / going private situations drag on for a long time indeed. What is more important from an investor perspective is, when does the stock start trading like it's a done deal. Eg: if the markets had high confidence, the stock would be a few (~3-5%) away from the take out price. When will this happen?

It needs to be noted that the markets don't get this confidence overnight. It's a multi step process, with a formal proposal, disclosure of deal participants, board approval, shareholder vote, etc.

My guess as to when the stock volatility and discount to offer price will start dropping is around early to mid Sep. By holiday time, it should be going for a shareholder vote. This will happen on Elon time (I.e. Super fast) because going slow is not an option. The execution in q3 /q4 is likely to take it way past the deal price.

If you think about it, Elon's going private tweet put a fire under this process. It may have been highly intentional after all.

 

[bdy0627]

A lot of these merger arb / going private situations drag on for a long time indeed. What is more important from an investor perspective is, when does the stock start trading like it's a done deal. Eg: if the markets had high confidence, the stock would be a few (~3-5%) away from the take out price. When will this happen?

It needs to be noted that the markets don't get this confidence overnight. It's a multi step process, with a formal proposal, disclosure of deal participants, board approval, shareholder vote, etc.

My guess as to when the stock volatility and discount to offer price will start dropping is around early to mid Sep. By holiday time, it should be going for a shareholder vote. This will happen on Elon time (I.e. Super fast) because going slow is not an option. The execution in q3 /q4 is likely to take it way past the deal price.

If you think about it, Elon's going private tweet put a fire under this process. It may have been highly intentional after all.

In order for the market to reduce the discount, it will need more information. So, your guess is that we will get some solid information over the next few weeks then?

 

[suwaneedad]

I'd expect to see the board announce a vote in favor of the $420 proposal prior to the Q3 earnings release, or for the board to die trying. The Q3 earnings and cash flow are going to blow the doors off the stock price and the board will want to get ahead of that wave of upward pressure on the stock price. The board's obligation is to ensure it is a fair deal for shareholders. That is easier to do with the stock at $300 than with the stock at $400. The board's other (real) obligation is to ensure it does not misstep in the process and leave a litigation door big enough for class action attorneys to drive a Tesla Semi through. These things, in other words, take time.

 

[bdy0627]

I'd expect to see the board announce a vote in favor of the $420 proposal prior to the Q3 earnings release, or for the board to die trying. The Q3 earnings and cash flow are going to blow the doors off the stock price and the board will want to get ahead of that wave of upward pressure on the stock price. The board's obligation is to ensure it is a fair deal for shareholders. That is easier to do with the stock at $300 than with the stock at $400. The board's other (real) obligation is to ensure it does not misstep in the process and leave a litigation door big enough for class action attorneys to drive a Tesla Semi through. These things, in other words, take time.

I keep hearing about Q3 earnings being a huge positive. I think they are definitely going to be a step in the right direction, but it looks to me like they will just barely show profits. Revenue growth will be huge though. Q4 on the other hand should be a huge catalyst.

 

[neroden]

A lot of these merger arb / going private situations drag on for a long time indeed. What is more important from an investor perspective is, when does the stock start trading like it's a done deal. Eg: if the markets had high confidence, the stock would be a few (~3-5%) away from the take out price. When will this happen?

Never.

I played the Trina Solar management buyout arbitrage, thanks to a tip from someone in this forum. Worked out great. The thing is, the 18% discount persisted basically up until the "We are cashing your shares out next week" announcment -- waaaaay after the deal had passed all regulatory hurdles and all votes.

I'm also sitting on another merger arb which has been extensively delayed where the market seems to discount the likelihood of its happening by over 18%... despite the fact that the only difficult regulatory hurdle has been passed and the stockholder vote is long over (there are other regulatory hurdles, but they all have verbal "yeah, we' don't see any problems" statements from the regulators).

And neither of these had anywhere near the same level of disinformation going. I expect the disinformation to go right up to the wire with TSLA.

 

[pz1975]

Never.

I played the Trina Solar management buyout arbitrage, thanks to a tip from someone in this forum. Worked out great. The thing is, the 18% discount persisted basically up until the "We are cashing your shares out next week" announcment -- waaaaay after the deal had passed all regulatory hurdles and all votes.

I'm also sitting on another merger arb which has been extensively delayed where the market seems to discount the likelihood of its happening by over 18%... despite the fact that the only difficult regulatory hurdle has been passed and the stockholder vote is long over (there are other regulatory hurdles, but they all have verbal "yeah, we' don't see any problems" statements from the regulators).

And neither of these had anywhere near the same level of disinformation going. I expect the disinformation to go right up to the wire with TSLA.

Can you share the current merger arb play you are watching/investing in?

 

[Sancho]

Offer submitted: mid September

Board approval: mid October

Shareholder vote and transaction closes: mid November.

Pass the turkey: end of November

 

[generalenthu]

Never.

I played the Trina Solar management buyout arbitrage, thanks to a tip from someone in this forum. Worked out great. The thing is, the 18% discount persisted basically up until the "We are cashing your shares out next week" announcment -- waaaaay after the deal had passed all regulatory hurdles and all votes.

I'm also sitting on another merger arb which has been extensively delayed where the market seems to discount the likelihood of its happening by over 18%... despite the fact that the only difficult regulatory hurdle has been passed and the stockholder vote is long over (there are other regulatory hurdles, but they all have verbal "yeah, we' don't see any problems" statements from the regulators).

And neither of these had anywhere near the same level of disinformation going. I expect the disinformation to go right up to the wire with TSLA.

Possibly, but my experience has been the opposite. I played a few arbs in the past.

They were all tighter than 3% close to the deal date. Here is Intel acquiring altera. 54 was the offer price and the last jump was china approving the buy out

Here is abbvie acquiring pharmacyclics for 261.25. It was about 5-8 bucks until closure for a long time.

Same deal with Lorillard / Reynolds American (please don't vote me off the island). Tight spread, but it was cash + stock offer. So lorillard was still moving 30 or so percent of Reynolds, which was the stock component of the deal.

Of course, I played SCTY arb heavily as well. That was more the exception than the rule. It is possibly going to be the case with TSLA as well. Right now if you calculate the go private probability using deal price and pre deal price, you'd be close to a negative 100% probability.

 

[ValueAnalyst]

Offer submitted: mid September

Board approval: mid October

Shareholder vote and transaction closes: mid November.

Pass the turkey: end of November

This sounds about right; maybe slightly slower by a few weeks, but not by months. Frankly, I see 51:49 chance of Tesla going private.

 

[neroden]

Yeah, normal merger arbs, the spread closes up pretty quick. The thing is, there was tons of FUD about "China!!!!" when it comes to the Trina Solar, and the other arb I'm currently playing. Nonsense stuff -- stuff which simply wasn't right, if you did your research. Spreading fears about things which might cause the deal to fail... which weren't actually issues and never had been issues.

For example, a big "what if China doesn't allow the funding to be moved out of the country from yuan into dollars" scare, when it turned out the money was *already in dollars* and *already outside the country*.

Tesla looks a lot more like that to me than like a normal merger arb. But with even more nonsense in the news.

 

[Ellec]

Won't be before end of Q1 2019. These things take 6-12 months. There are many parties involved. I also see $420 being the starting bid, will go up much more than that.

 

[CatB]

@ValueAnalyst Wow! I’m surprised you’re more optimistic about date (before Thanksgiving?), and less optimistic about overall odds of this occurring at all.

My opinion is too uninformed to offer, but based on experiences others have shared here on this board, my gut impression of consensus is 1Q19 timeframe and 75+% likelihood.

I’d be interested in your rationale, if you could clarify, please?

 

[ValueAnalyst]

@ValueAnalyst Wow! I’m surprised you’re more optimistic about date (before Thanksgiving?), and less optimistic about overall odds of this occurring at all.

My opinion is too uninformed to offer, but based on experiences others have shared here on this board, my gut impression of consensus is 1Q19 timeframe and 75+% likelihood.

I’d be interested in your rationale, if you could clarify, please?

Quicker, because... Elon. No fundamental reason why the process should take nine months. If Elon wants to do it, he can get it done quickly.

51% and 75% are not really that different, as both indicate likeliness and both leave ample room for being wrong.

Correction to above post: I meant "slower" not "lower" - so I'm thinking December for closing, if it happens.

 

[DaveT]

My guess is Elon and the board will try to have the shareholder vote by end of October so that there's no need to do the Q3 quarterly report. After the shareholder vote passes, then it will probably take another 2-4 months to private.