Wednesday, 12 December, 2018

Elon Musk considers taking Tesla private

Elon Musk Elon Musk
Orlando Vargas | 08 August, 2018, 06:30

Tesla CEO Elon Musk's discussion of privatizing the company's shares sparked a seesaw in prices before trading was suspended.

Elon Musk shocked Tesla investors - and the Twittersphere - on Tuesday by announcing on the microblogging site that he wants to take his company private. The rally falling well short of $420 is a sign of market skepticism that Musk's plan is feasible.

Taking Tesla private "makes a ton of sense", said Gene Munster, a managing partner at venture capital firm Loup Ventures.

In an internal email, sent from Musk to Tesla employees on August 7, the CEO confirmed most of this, as he explained his thinking directly.

At $420 per share, a deal would represent a 22.8 per cent premium to Tesla's closing price on Monday, making it one of the biggest go-private deals with a price tag of about $72 billion.

The company's stock price jumped from US$342.54 ($460.76) prior to the announcement to US$379.57 ($510.60) at the day's close, a rise of nearly 11 per cent, but still significantly short of the proposed buy back price.

"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", he wrote.

Despite its challenges, Tesla has remained a favourite among many investors, partly due to their faith in Mr Musk, who made his initial fortune as a co- founder of PayPal and also is the chief executive of a trail-blazing aerospace company, SpaceX, that's already private.

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Elon Musk considers taking Tesla private in tweet, shares rise
The company is now valued at just over $60 billion, with Musk holding an nearly 20 percent stake in the company. That price would represent a 22.8 percent premium to Tesla's closing price on Monday.


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In its second quarter results for 2018 the company posted $4bn of revenue and a loss of $717m. On April Fool's Day, amid growing market concerns about Tesla's cash crunch, he had tweeted a fake news release that said Tesla would have to file for bankruptcy.

The number of shares borrowed to sell the stock short stands at 33.8 million shares, according to data compiled by IHS Markit, meaning that Musk's tweet alone sent a $US783 million shock through the bear patch.

The proposal will have to be voted on by Tesla shareholder before it goes ahead.

The Financial Times is reporting that Saudi's Public Investment Fund (PIF) has built a significant stake in Tesla - to the tune of between 3% and 5% of the all-electric vehicle maker's shares this year. The company did not immediately respond to a request for comment on the likelihood that it will go private, potential timing for doing so, or the funding sources Musk referred to.

At $420 per share, it would be the largest deal of its kind, valuing the company at around $80 billion.

The goal, Musk added, was not to tighten his grip on Tesla.

"This has nothing to do with accumulating control for myself", Musk said in the Tuesday email.

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