Here's why Elon Musk wants Tesla to go private

08 August, 2018, 03:57 | Author: Eric Barnett
  • Elon Musk considers taking Tesla private as stock jumps

CEO Elon Musk said on Twitter he is considering taking Tesla Inc. private at $420 U.S. per share as the electric vehicle maker faces the challenges of fast growth and financial constraints, sending its shares up more than six per cent.

In an interview with Bloomberg News in January 2015, he spoke of the benefits of running his closely held rocket company Space Exploration Technologies Corp. and his frustrations with having taken Tesla public in June 2010. Musk has had feuds with regulators, critics and reporters, and questions remain about Tesla's production and manufacturing difficulties, long-term demand for its cars and uncertainty over funding.

The company has only posted a quarterly profit twice in its history and has never made money during an entire calendar year, something that Musk has been trying to change by cutting costs, including recent mass layoffs that trimmed Tesla's workforce by 9 percent.

Trading for Tesla stock was re-activated fifteen minutes before the closing bell was rung, and the automaker closed the day up 12 percent, realizing a massive $6 billion+ appreciation in market capitalization. The company had a market value of $58bn as of Monday's close.

"There's a lot of noise that surrounds a public company and people are constantly commenting on the share price and value", Musk said in 2015.

Earlier in the day, the Financial Times reported that Saudi Arabia's sovereign wealth fund, overseen by Crown Prince Mohammed bin Salman, has built an undisclosed stake of between 3 and 5 percent stake in Tesla.

Investors may be wondering what Elon is smoking this morning following a tweet in which he claimed he's considering taking Tesla private at $US420 ($566) per share. He went on to say he hopes all shareholders stick with the company but, if not, this is their time to exit while still making a "nice premium". Through the law, the SEC essentially condoned social media announcements.

It's no joke that particularly in the United States and here in Australia, public companies are using share markets more for capital subversion, tax minimisation and corporate capture rather than truly creative, risky capitalistic endeavours.

"Am considering taking Tesla private at $420", Musk tweeted on Tuesday, adding that he had "funding secured". In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets.

Short-sellers, who had been saddled with sharp losses earlier this month after Tesla shares soared following quarterly results, suffered paper losses of about $1.3 billion and were now $3.03 billion in the red for the year, according to S3.

Third, the intention is not to merge SpaceX and Tesla.

Musk later brought some clarity to the situation in an email to Tesla employees that was also posted on Tesla's blog.

Should Tesla decide to go down this route, it will need to be approved by a shareholder vote.

"I wish we could be private with Tesla", he told Strauss.

"This has nothing to do with accumulating control for myself", Musk wrote. "I own about 20% of the company now, and I don't envision that being substantially different after any deal is completed".



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