Elon Musk said on Twitter today that he is “considering” taking Tesla private “at $420,” and that he has secured the funding to do so. In a follow up email sent to Tesla employees, Musk indicated that the tweet was serious, and not just a weed joke. “The reason for doing this is all about creating the environment for Tesla to operate best,” Musk wrote.
Details of how Musk would take Tesla private remain murky. Musk said he would make an offer to buy out Tesla stock at $420 per share. But he also said that shareholders would have a choice whether to sell at that price or remain with the company as it went private. Taking the company private would require a shareholder vote, he said.
Tesla shares opened just below $344 today but have spiked following a report about Saudi Arabia taking a stake in the company worth $2 billion or more. An hour after Musk’s initial tweet, trading of Tesla shares was halted. They resumed again about two hours later, with its stock briefly soaring past $380.
Am considering taking Tesla private at $420. Funding secured.— Elon Musk (@elonmusk) August 7, 2018
If Musk were to take Tesla private, he would need a huge amount of cash to do so — more than $50 billion, according to Bloomberg, reportedly making it “the largest leveraged buyout in history.”
Musk indicated in two tweets that he has the necessary funding. However he’s yet to state where it’s coming from, and major Wall Street banks seemed to be unsure as well, according to CNBC.
In his email, Musk said taking Tesla private would insulate the company from the “enormous pressure” of the quarterly earnings cycle, which he doesn’t believe fits with the company’s “long-term, forward-looking mission.” He also said going private would allow the company to avoid issues with short sellers who would profit off Tesla’s failure and “have the incentive to attack the company.”
Musk said that he currently owns about a 20 percent stake in Tesla and that he wouldn’t sell as part of the buyout. He would remain CEO after going private, Musk wrote, and he doesn’t believe the change will result in him holding substantially more of the company afterward. However, Musk already has an outsized amount of control over the company, despite not holding a majority stake. As TheStreet reported earlier this year, Tesla has supermajority requirements on major votes, which means nearly all outside investors have to vote against Musk to win out in a dispute.
Once Tesla has “slower, more predictable growth,” Musk wrote, it “will likely make sense” to bring the company public again.
Musk didn’t provide a timeline for when an offer would formally be proposed. And in his email, he wrote that “a final decision has not yet been made.” But he wrote that he expects the process to end with a private Tesla.
In recent months, Musk has been in a heated debate with short sellers who believe that Tesla will ultimately fail, even going so far as to supposedly call an anonymous investment blogger’s boss to get them fired. As a public company, Tesla’s continued struggles to produce vehicles and make a profit have been watched closely, even as Musk continues to promise eventual turnarounds — like what happened with the Model 3.
Buying out the company and going private would allow Tesla to stay out of the public eye as it deals with these growing pains. At least, to the extent that Musk could ever allow himself or his company to fall out of the headlines.