Key takeaways from JPMorgan’s study of Tesla’s ‘go private’ plan

In a note, JP Morgan said it thinks Tesla owes it $162 million because of Elon Musk’s tweet about a potential take-private plan.

If this goes ahead, it goes into the red column of Tesla’s balance sheet and flips it to green, adding $150 million in cash to a total amount of $550 million in cash and cash equivalents.

Perhaps more importantly, the final bill may be higher than the JP Morgan projection. A full analysis from Credit Suisse, a Tesla partner bank and investor, estimates that the entity Musk announced potentially consolidating Tesla would need $400 million in financing.

Skeptics have questioned whether Tesla would actually be able to finance this, a concern that naturally raised eyebrows on Wall Street. The calculation of “$600 million” from JP Morgan makes no reference to this.

Here are two takeaways from the JP Morgan analysis, based on the assumption that Tesla raises all the cash it needs to take Musk’s proposal off the table.

First, it suggests that the company is having difficulties doing business:

“Tesla’s strained relationship with its largest shareholder has reached a critical point. In lieu of timely and effective disclosure, Tesla investor tension likely escalated to a new level.”

Second, it indicates that shareholder capital is key:

“No other realistic solution presents a viable path forward for Tesla, and investors are holding reservations about putting further capital at risk.”

As for the actual expenses involved with Musk’s proposed plan, JPMorgan estimated that they would be $231 million in 2018, $193 million in 2019 and $132 million in 2020. But it said there’s “a good likelihood” that these cost would be amortized over multiple years “as opposed to being recognized as an extraordinary expense immediately upon cash being raised.”

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