In a surprise move, Elon Musk has announced to take his electric car maker company Tesla private at $420 per share. 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,” Musk wrote to Tesla employees in an email on Tuesday.
According to him, being public also subjects Tesla to the quarterly earnings cycle that puts enormous pressure on it to make decisions that may be right for a given quarter, but not necessarily right for the long-term.
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.The news led to Tesla share going up to $343.84 at the end of trading on Tuesday.
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Musk took Tesla public back in 2010, but he maintained his other company, SpaceX, private, which offered him a great comparison point.
The CEO has often bumped heads with Wall Street over how they perceive Tesla and its potential because he thinks the financial industry is too focused on short-term quarterly results over the long-term potential of the company.
Now Musk tweeted that he is considering bringing the company private at $420 per share and that he already has the money secured.
Am considering taking Tesla private at $420. Funding secured.
— Elon Musk (@elonmusk) August 7, 2018
At $420 per share, it would be a move worth over $70 billion with the current number of outstanding shares – though Musk already holds over 20% of the outstanding share, which would reduce the money needed to secure the transaction.
Musk said he wants all Tesla employees to remain shareholders of the company just as is the case at SpaceX.
“The intention is not to merge SpaceX and Tesla. They would continue to have separate ownership and governance structures,” Musk wrote.
He need the support of other major shareholders, but the CEO has historically often been able to get shareholders behind him, most recently with the SolarCity acquisition. This proposal to go private would ultimately be finalised through a vote of shareholders.
“Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote,” Musk tweeted.
Investor support is confirmed. Only reason why this is not certain is that it’s contingent on a shareholder vote. https://t.co/bIH4Td5fED
— Elon Musk (@elonmusk) August 7, 2018
