Elon Musk jolts Wall Street with tweet on going private
Elon Musk jolts Wall Street with tweet on going private
Elon Musk is the chairman and CEO of Tesla
08 August, 2018, 09:28
Elon Musk has "surprised" the market by laying out a tentative plan to privatise the now publicly listed Tesla electric car/solar energy company with a $420 per share price offer.
Tesla has been the subject of a number of short sales by investors - who feel the money-losing company doesn't have a path to profitability and that its shares will tumble. Dan Primack of Axios tweets: "One of two things is true right now: Elon Musk has quietly pulled a huge coup, and secured enough financing to buy his company at a premium. 2".
At US$420 per share, a deal would be worth US$72 billion (S$98 billion) overall.
Trading in Tesla was halted at 2:08 p.m. ETpending the release of news. "Funding secured." Still, owing to the informal nature of the platform as well as the $420 stock price's close association with so-called weed day dated April 20, many questioned whether Musk was serious.
Askedon Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be "no change".
The following email was sent to Tesla employees today:Earlier today, I announced that I'm considering taking Tesla private at a price of $420/share. As he explained "Being public ... 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".
Musk has been in a very public battle with these shorts for years. Even as the world's 31st-richest person and Tesla's largest shareholder, Musk would be reliant on outside funding for any buyout since his fortune is highly illiquid.
"Being forced to sell at $420 in a go-private deal would be a little bit of a bummer because, although myself and all the other Tesla investors would make money at an all-time high, we'd be missing out on a long-term ride", Russell said.
In his letter to employees, Musk also pointed to pressure from short sellers as a major downside to being a public company.
"Musk does not want to run a public company", said Gene Munster of Loup Ventures, as Tesla's ambitious mission makes it "difficult to accommodate investors' quarterly expectations".
And yet it also left many questions unanswered, namely how Musk - who owns nearly 20 percent of the company - would be able to come up with the $66 billion necessary to complete the transaction. He said in his letter to employees that he did not seek to expand his ownership.
Investors like billionaire George Soros now have the option to take advantage of Tesla's recovering share price, as the company's $920 million convertible bond due in March 2019 passed its $359.8676 conversion rate. He says the move could be structured so that so that all shareholders will have a choice to remain investors in the private company or sell their stock for $420 (£324.58 / €362.11) per share.
Tesla is the most shorted company on Wall Street.
The stock move could give Tesla some debt relief.
Musk then outlined how he imagines a privately held Tesla would work.
While the decision isn't set in stone, Musk layout out a provisional plan to take the company private.
He also said trading its stock publicly "means that there are large numbers of people who have the incentive to attack the company".
How does Saudi Arabia fit into all this?
Earlier on Tuesday, a source familiar with the matter said Saudi Arabia's PIF had bought a minority stake of just below 5 per cent in Tesla. Mr Musk's offer is 9 per cent higher than Tesla's peak closing price of $US385 reached almost a year ago.
The SEC did not immediately respond to a request for comment on Musk's tweet. Musk also said he had no intention of selling his stake, and he said he would remain on as CEO.
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