Elon Musk Says He's Considering Taking Tesla Private; Tesla Suspends Shares As It is Expected To Make an Announcement (cnn.com)

Elon Musk said he's thinking about taking Tesla private. More specifically, he said he may buy back the company for $71.3 billion (at a share price of $420), and already has the funding to do so. From a report: Musk, the CEO and largest shareholder of the electric car maker, said on Twitter on Tuesday that he has secured funding from a private buyer. He implied that the funding values the company at $420 a share. The stock had been worth about $342 a share before Musk's tweet, and shares quickly jumped as high as $371. The stock had climbed slightly earlier in the day after the Financial Times reported that Saudi Arabia has quietly built a big stake in Tesla. Tesla didn't immediately respond to a request for comment. About an hour and 20 minutes after the Musk tweet, trading in Tesla stock was suspended because the company was expected to release news. TechCrunch: Musk's hope, he later tweeted, is that "all current investors remain with Tesla even if we're private. Would create special purpose fund enabling anyone to stay with Tesla. Already do this with Fidelity's SpaceX investment." Musk, who said he would stay on as CEO, also seems willing to have a provision for retail investors, who have held Tesla shares prior to Dec. 31, 2016, to convert their shares into private shares. Musk, in response to a tweet, said he's "super appreciative of Tesla shareholders" and "will ensure their prosperity in any scenario." Musk has publicly mused about taking Tesla private before, saying in a 2017 Rolling Stone profile: "I wish we could be private with Tesla," Musk murmurs as they exit. "It actually makes us less efficient to be a public company."

Analysts speaking to Reuters said they believe Musk is serious. George Galliers of Evercore ISI, said, "I can't believe this is something to bluff or make fun of. Given his historic frustration with short sellers, analysts and certain parts of the press, it is perhaps also not surprising that he has given consideration to taking the company private."

Update: Elon Musk sent an email to employees on Tuesday to explain his rationale behind the move. He wrote: Earlier today, I announced that I'm considering taking Tesla private at a price of $420/share. I wanted to let you know my rationale for this, and why I think this is the best path forward. First, a final decision has not yet been made, but the reason for doing this is all about creating the environment for Tesla to operate best. 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, all of whom are shareholders. 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. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company. I fundamentally believe that we are at our best when everyone is focused on executing, when we can remain focused on our long-term mission, and when there are not perverse incentives for people to try to harm what we're all trying to achieve. This is especially true for a company like Tesla that has a long-term, forward-looking mission. SpaceX is a perfect example: it is far more operationally efficient, and that is largely due to the fact that it is privately held. This is not to say that it will make sense for Tesla to be private over the long-term. In the future, once Tesla enters a phase of slower, more predictable growth, it will likely make sense to return to the public markets. In a tweet moments ago, Musk said, "Investor support is confirmed. Only reason why this is not certain is that it's contingent on a shareholder vote."

Comments

So Few Public Companies

[glennrrr]

I don't if it's the regulatory environment or what driving the trend towards privately owned companies, but every time one goes private there's less ability for common small investors to benefit from wealth generation. I'm just a worker with a 401K, and I'd like to get the returns needed to retire on my investment income. Events like this make it slightly harder to do.

Re:So Few Public Companies

[edtice1559]

This comment makes no sense. The OP's point is that if the best companies keep going private, investing in an index fund will start yielding lower returns and then retail investors will be completely shut out. If those index funds suddenly comprise only penny stocks, they wouldn't be good investments. Whether there is a risk of this happening or not is an interesting discussion (but off topic). But the OP is spot on that public markets are the last place where retail investors can get a good return. If those go away, there will be little upward mobility left.

Re:Do it

[zlives]

Saudi Arabia called, they want their Oil in control

Time to rethink public corporations

[mykepredko]

I'm not surprised Mr. Musk is doing this, he is clearly fed up with Wall Street and trying to meet their quarterly expectations rather develop the company and the products for the long term. I would think that dealing with analysts/quarterly statements and their (potential) fallout to be essentially overwhelming as well as causing the executive suite to try and maintain a positive outlook every twelve weeks.

Going private doesn't mean that the stress of creating the best product and making a profit goes away, just that more focus can be put on the company and its products which should result in better products and a better ROI for the company's owners at the end of the day.

I would expect other companies with long lead time products (Boeing, Ford, etc.) will consider finding private investors and taking themselves out of the exchanges so they can focus on their businesses and not making Wall Street investors happy.

Re:Time to rethink public corporations

[barc0001]

> trying to meet their quarterly expectations rather develop the company

Absolutely right. We've been seeing what happens to long standing tech institutions when the investors' quest for better quarterly numbers is king - R&D is sacrificed, entire parts of the company are sold off, and after the investors sell to take their profits and move elsewhere, the company is a sad shell of itself.

And it's not just tech companies, it's most public companies. One of the public companies I worked for in years past owned the building they were in and rented out the bottom 3 floors to other businesses for a decent chunk of revenue, but decided one quarter that selling the building would be a great way to prop up the numbers for the shareholders and get some capital. Needless to say they went into receivership and were sold piecemeal a few years later as it turns out that a one time cash infusion doesn't help a company's long term bottom line nearly as much as renting out 3 floors of a commercial/retail building in one of Canada's most expensive neighborhoods (Vancouver's Kitsilano area), but hey quick cash made the shareholders happy that quarter.

R & D

[Anonymous Coward]

While it is certainly his money (or investor's money) to do with what he will, but it seems as if it would be more prudent to use that kind of funding to accelerate production and research.

Re: Do it

[WindBourne]

They want their money in control. Like China, Saudi Arabia is investing in a number of western companies. Smart.

That private funding deal better be real

[JoeyRox]

Otherwise Musk just committed a securities violation by lying about a potential private buyout.

Re:That private funding deal better be real

[drinkypoo]

Dumb enough to insult analysts instead of presenting a plan to profitability

The analysts were being insulting, they deserved to be insulted. Stop crying about their crying.

He only pays for shareholders selling

[SuperKendall]

it seems as if it would be more prudent to use that kind of funding to accelerate production and research.

Free of noise and short manipulation he'll have a lot more time and funds free to go into R&D.

Once could also argue this move is a massive marketing expenditure as without short backing, negative Tesla news stories will dry up like dust in the wind, and sales should soar ever higher...

Remember, he only has to actually spend money on people wanting to sell shares - the large majority of Tesla investors (like myself) would not be selling at $420, we'd continue to be private shareholders, so that would be part of the funding not spent that could be used further on R&D. So while he has $84 billion in funding to take TSLA private, he probably will only have to spend about 20$ of that on share buybacks and can put the rest into other efforts.

Re: Do it

[93 Escort Wagon]

Another problem is Musk’s notoriously fragile ego.

May want to read summary again.

[SuperKendall]

I don't think you grasp what has happened. Must has secured enough funding to buy back every single share at $420.00 (ha ha Elon). Trading is suspended pending this announcement. Tesla is THE buyer now, and so is paying for any stock sales that will happen as part of the transition.

People who do not want to sell will be converted to private shares. So the only cash Tesla has to spend is on the shareholders that do not want to go private and get out - basically the short holders, plus probably some small number of people that consider $420 a great exit point to avoid any further risk.

were you asleep in econ 101?

Yes because I already knew everything they were teaching there from my own studies in grade school, but unlike you I actually attended economics and business classes beyond Econ 101 so I can understand what is occurring.

Re: Do it

[datavirtue]

Foreign ownership of any asset is a gamble. At any time the government can re-appropriate it or revoke the debt without payment and of little consequence. Foreigners owning property and debt in my country concern me very little for this reason. We get their money in good times...and we can take the shit back if we need it.

There is a line though

[SuperKendall]

I see what you are getting at and I don't exactly care either, I too mostly say let people do what they want.

However in the case of Tesla it's gone a lot further than that, and into the realm of there being so many shorts and some of vast size, they were trying desperately to manipulate and lower the stock price, trying to drive the company out of business.

When you cross the line from "Well I'll bet the company will fold", to actually trying to cause a company with tens of thousands of employees to fail, then I get pissed off. You are affecting those who bet the company would not fail, but worse you are affecting the lives of a lot of people with jobs there.

You are going to see a remarkable shift in Tesla coverage over the coming years with nothing more to gain from short sellers, probably a few vindictive "I sat at thee from the depths of hell" level articles from those poor shorts who believed the lie the industrial short sellers were peddling than Elon would fail...

So I do feel a little sorry for shorts that were too small to actually affect public stock and news. But not too sorry because the mindset it takes to invest via shorts is a feel a fundamentally bad moral choice, and I would never use that myself - if I don't like a company I just don't buy from them, I don't actively bet on failure. It's really unhealthy to build any aspect of your life around negative mindsets, it bleeds into other aspects of your life and makes you an unpleasant person.