Elon Musk announced on Twitter today that he is “considering” proceeding Tesla private at $420. Also, he has secured the funding for the same. He made it clear to the Tesla employees through a follow-up mail that the tweet was real, and not just a random joke. Musk believes that doing so would create the best working environment for Tesla to function. The question regarding how Musk would take Tesla private is suspicious. Musk stated that we would offer to buy Tesla stock at $420 per share. But, he also added that as the company will go private, shareholders will be able to either sell the stock at that price or remain with the company. For taking down the company as private would require a vote of shareholders.
Today, Tesla shares opened just below $344. But, following a report about Saudi Arabia supporting the company worth $2 billion or more managed the price to penetrate. Following Musk’s tweet, trading of Tesla shares was completely stopped. Later on, it resumed again after two hours with stock soaring around $380.
— Fred Lambert (@FredericLambert) August 8, 2018
For Musk, taking Tesla private would require a huge amount of cash – around $50 billion. It is the strongest buyout in history.
Musk is prepared with the necessary funding
Musk made it clear that he has the necessary funding in his two tweets. But, he didn’t mention anything about where it is coming from. Surprisingly, major Wall Street banks are also confused about this. According to the mail by Musk, taking Tesla private would help the company to get relief from the pressure of quarterly earnings cycle. For long-term, Musk believes that such pressure doesn’t fit with the company’s growth. He wants Tesla to avoid issues of short sellers profiting off from Tesla’s failure.
Everything depends on a shareholder vote
Musk wants to continue as a CEO of Tesla after going private. So, he wouldn’t sell off his 20 percent stake in Tesla as a part of buyout. He also stated that he doesn’t want to hold more of the company even after the company goes private. Musk definitely has major control over the company despite not being a major shareholder. So, to win against Musk in this issue, all outside investors will have to vote against him. In his mail, Musk also stated that once the company becomes slower, but more predictable, it will again become likely to bring the company public. Musk didn’t provide any formal dates about this offer. Also, he stated that the final decision is yet to be made. But, he expects that the process ends with a private Tesla.
In recent months, Tesla faced a lot of issues due to short sellers who believe that Tesla will definitely fail. Controversy of Musk and short sellers continued which lead the company’s operations to be watched closely. With Tesla going private, it will be free from the public eye as it deals with these growing issues. Musk wants to get the company away from such headlines and progress.