Published: Wed, August 08, 2018
Business | By Eloise Houston

Musk says going private would free Tesla

Musk says going private would free Tesla

The disclosure initially raised questions whether the eccentric Musk was joking, but he then amplified on his plan in a subsequent tweet that said he meant to create a special fund that would allow all current Tesla shareholders to retain a stake in the auto maker if they want.

Musk claimed on his personal Twitter account to have secured funding for the maneuver, estimating the per-share valuation of the possible transition at $420.

The SEC declined comment on Musk's tweet.

Shares were halted on the Nasdaq shortly after the story broke, citing "pending material news" from the company. He also noted that going private would avoid stock shorting attempts to harm the company. Prices seesawed in the range of $360 to $370, a roughly 7 to 8 percent rise for the day, while investors tried to decide whether Musk was joking.

The stock had already been heading upwards after news about a Saudi Arabian fund with a large (about 3 to 5 percent) stake in the electric vehicle company. SpaceX is a flawless example: it is far more operationally efficient, and that is largely due to the fact that it is privately held.

Short sellers - investors who offer to sell shares in the stock in the future (that they may not own, which is legal) at a price lower than curent price, in hope the stock falls even more - were liable for $884 million in losses Tuesday.

A buyout at US$420 per share probably won't let Musk reap any benefit from the US$2.6b stock option grant he received this year.

"The Securities and Exchange Commission issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information", the commission wrote in a 2013 press release. The company said it expects to be profitable during the second half of 2018.

Short interest in Tesla on Monday stood at almost $12 billion, equivalent to 28 percent of its float, according to S3 Partners, a financial analytics firm.

UPDATE 3:46 PM EST: Musk published a blog post on Tesla's website which contained an email to employees explaining why taking Tesla private may be the right move for the company.

Second, my intention is for all Tesla employees to remain shareholders of the company, just as is the case at SpaceX. However, the structure envisioned for Tesla is similar in many ways to the SpaceX structure: external shareholders and employee shareholders have an opportunity to sell or buy approximately every six months.

"This has nothing to do with accumulating control for myself", he said.

But time and again Musk and Tesla have been given more time to achieve success.

"Am super appreciative of Tesla shareholders", Musk said. He responded to one user who observed that going private would save Tesla "a lot of headaches".

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