Published: Thu, August 09, 2018
Business | By Eloise Houston

Here's why Elon Musk wants Tesla to go private

Here's why Elon Musk wants Tesla to go private

In a letter to shareholders after his tweet on Tuesday, Musk fleshed out his idea, suggesting they would get the option to sell their shares for $420 USA each or remain investors in a private Tesla, out of the glare of Wall Street and its need for quarterly results.

The SEC declined to comment on the reports.

Major shareholders include mutual fund giants Fidelity Investments and T. Rowe Price Group, whose holdings represent, respectively, 9% and 8% of Tesla's stock, per Barron's.

Elon Musk's tweets early on Tuesday caused plenty of speculation and controversy. Tesla lost another $717.5 million in its most recent quarter. As Tesla's largest shareholder, Musk owns almost 20% of the outstanding shares and stands to gain as the stock price rises.

Musk is already CEO of another private company: SpaceX.

In a statement on Tesla's website, six of Tesla's nine directors said the board had met several times over the last week to discuss such an idea and was "taking the appropriate next steps to evaluate this". He announced to the investment world via Twitter on Tuesday, "am considering taking Tesla private at $420".

Taking Tesla private would allow it to focus on revolutionising the automobile industry, Musk believes.

The Journal reported that the securities regulator is looking into the legitimacy of Musk's comments, and why he made the disclosure on Twitter instead of through a formal filing.

One of the biggest questions surrounding the buyout is Tesla's long history of losing money while it has been investing in electric auto technology and ramping up production of its vehicles.

Musk has promised to begin making money on a consistent basis starting in the third quarter, escalating the pressure that he has already publicly acknowledged has taken an huge toll on him.

The billionaire has at least been clear about his resentment of life on the public market.

They said this "included discussion as to how being private could better serve Tesla's long-term interests".

It's possible Musk could persuade some large institutional investors to remain shareholders in the private company, which could reduce his funding needs, Sacconaghi said. Alternatively, stockholders can hold on to their shares, which would become privately-traded.

JPMorgan analyst Ryan Brinkman said he gave only a 50 per cent probability that Tesla would go private. The value of his shares at that price would total $72 billion, short of the $100 billion performance bar it must cross for him to be able to exercise his $2.6 billion stock-option grant, Bloomberg noted.

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