Elon Musk decided this morning that he would send everyone into a frenzy this morning by announcing through twitter that he was considering taking Tesla private at $420 a share.
Musk decided to tweet out this bombshell this morning
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
After some mad hysteria on Twitter, Musk made a proper blog post explaining his rational behind this possible decision.
Initially Tesla was a private company just like SpaceX, until it was made public in 2010 which keeping SpaceX a private company. This allowed for Musk to have an experiment into which type of company was easier to manage. Now if you’ve followed Tesla for even a little while, you know how under the microscope every single decision Tesla makes is under. You would also know that it is constantly targeted by short sellers that always hope that the company crashes and burns. As Musk writes in the blog post, this provides a lot of distraction towards the company and decreases efficiency.
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.
So how is Musk planning to take the company private? From the very beginning he states that he wishes all current shareholders to stay shareholders. But if they so wish, any shareholder can be bought out at $420 per share, a 20% premium over the stock price at the Q2 earnings call.
To those worried that this is a ploy for Musk or some other shareholder to take majority ownership of the company, Musk addressed that that was not the plan.
I don’t have a controlling vote now & wouldn’t expect any shareholder to have one if we go private. I won’t be selling in either scenario.
— Elon Musk (@elonmusk) August 7, 2018
And was once again stated in the blog post:
Finally, this has nothing to do with accumulating control for myself. I own about 20% of the company now, and I don’t envision that being substantially different after any deal is completed.
Now this doesn’t seem to be some sort of spur of moment outburst from Musk. He stated that funding was already secured, so this must have been set into motion months ago and we can only guess as to who the company(s) are that are ready to throw money at Tesla for $420 a share.
While it all seems set and ready to go, this decision must still be voted on by the shareholders of the company before it can go through. So we all still have to wait before anything becomes official.
What do you guys think of the situation? Who do you think the investors are? How do you feel about the fact that short sellers may never get their chance to short Tesla again if they go private? Let us know down in the comments below.
